Nutrien, a supplier of nitrogen and potash fertilizer, vaulted past Q4 estimates after Wednesday's close and signaled a monster year in 2022. If that wasn't enough, the Saskatchewan, Canada-based company boosted its dividend and said it will buy back at least $2 billion of its stock. NTR stock jumped close to a buy point in early stock market action.
"The outlook for global agriculture and crop input markets is very strong and we are well positioned to deliver significant growth in earnings and free cash flow in 2022," Nutrien CEO Ken Seitz said in a statement.
CF Industries, a supplier of nitrogen-based fertilizer, posted Q4 results that came in shy of estimates on Tuesday. Still, these are great times for the Deerfield, Ill., company, which generated record cash flow in 2021 and expects the good news to last into 2023. CF stock opened lower on Wednesday morning, but soon turned positive, rallying close to buy range.
"Management expects the global nitrogen supply and demand balance to remain tight for the foreseeable future and for the commercial environment to be highly favorable for producers in low-cost regions" like the U.S., CF said in an earnings statement.
Both CF and Nutrien have been solid performers in a difficult market. CF stock is a current IBD Leaderboard listing, while both CF and NTR have a best-possible 99 IBD Composite Rating, a single rating combining both fundamental and technical factors.
Both CF stock and NTR fell sharply on Monday, then bounced on Tuesday after tests of their 50-day moving averages. The volatility is at least partly tied to mixed signals about whether Russia will invade Ukraine. An invasion of Ukraine could have implications for fertilizer prices, both indirectly through higher natural gas prices and directly through sanctions on exports.
Potash, another key market for Nutrien, already has seen prices surge amid sanctions on Belarus amid an authoritarian crackdown following last year's disputed election.
Natural gas is the key raw material for ammonia, from which nitrogen fertilizers are processed. CF and Nutrien benefit from access to relatively low-cost natural gas. Meanwhile, a jump in European natural gas prices has boosted fertilizer prices on a global basis, as marginal producers require a higher price to cover costs. Still, natural gas prices are well down from their peak in Europe.
JPMorgan analyst Jeffrey Zekauskas downgraded CF stock to neutral from overweight on Thursday, while hiking his price target to 75 from 70. With natural gas prices and nitrogen fertilizer prices likely past their peak, he says investors aren't likely to give CF stock a higher earnings multiple.
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Nutrien Earnings
Estimates: Earnings per share are seen vaulting 858% to $2.30, according to Zacks Investment Research. Revenue is seen growing 59% to $6.43 billion.
Results: EPS soared 929% to $2.47 on revenue growth of 79% to $7.27 billion.
Outlook: Nutrien offered a guidance range for adjusted EPS of $10.20 to $11.80, with even the low point well above estimates of $9.46.
NTR Stock
NTR stock ended trade on Wednesday up 0.9% to 75.06, then rose 2.9% to 77.25 in early Thursday stock market action.
NTR has a 77.45 buy point from a five-week cup base, according to MarketSmith. The buy zone runs through 81.32.
Be sure to read IBD's daily afternoon The Big Picture column to get the latest analysis of the market's prevailing trend and what it means for your trading decisions.
CF Earnings
Estimates: Analysts saw CF earnings exploding 752% vs. a year ago to $3.41 per share. Revenue was seen rising 135% to $2.59 billion.
Results: CF's adjusted EPS rose 718% to $3.27. Revenue grew 130% to $2.54 billion. Full-year adjusted EBITDA came in at $2.74 billion, up 103% from a year ago. That was a hair below the midpoint of CF's own guidance range of $2.65-$2.85 billion issued Dec. 9.
The increase in profitability came despite higher natural gas costs. Natural gas costs in Q4 was $6 per million British thermal units for CF, including at its U.K. facility.
CF Stock Analysis
CF stock fell as low as 68.87 on Wednesday, then rallied to close 3.1% higher at 74.42. But after the JPMorgan downgrade, CF stock pointed 1.3% lower early Thursday. After tumbling 6.9% on Monday, CF stock rebounded from an intraday drop below the 50-day line on Tuesday to close up 1.1%.
Rebounds from the 50-day/10-week line can be a good point to pick up leading stocks — if the market backdrop is conducive. CF stock has rebounded three times from that key technical level following an October breakout. However, rebounds of three times or more from the 50-day/10-week line generally carry added risk of failure.
CF stock has formed a pattern called an ascending base, which can be bullish in a choppy market. The buy point is at 74.87.
