Nutrien Ltd. NTR is gaining from higher prices and strong demand for crop nutrients, its actions to boost production and strategic acquisitions amid headwinds from higher costs.

The company’s shares are up 44.3% in a year, compared with a 49.4% rise recorded by its industry.

Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

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What’s Favoring NTR?

Nutrien is benefiting from solid demand and higher prices for fertilizers, backed by the strength in global agriculture markets. The company is also gaining from higher net realized selling prices for crop nutrients as witnessed in the second quarter of 2022. It witnessed higher sales across all the segments in the quarter, driven by higher selling prices and strong demand.

Potash prices have been driven by robust global demand and tight supply. Tight inventory along with healthy demand is also driving phosphate prices globally. Lower global supply availability stemming from reduced operating rates, strong demand and a spike in energy prices are likely to have also boosted nitrogen prices.  Supply constraints are driving ammonia and nitrate prices. Higher prices are expected to drive the company’s sales and margins for full-year 2022.

Nutrien is also taking actions to boost potash production in the wake of tightening global potash market conditions. The move is in response to strong market fundamentals and is geared to enable its customers have the crop inputs they require to feed a growing population. Its actions to boost production are supporting its potash sales volumes.

The company is also well placed to gain from acquisitions, cost efficiency, and increased adoption of its digital platform. It continues to expand its footprint in Brazil through acquisitions.

A Few Challenges

The company’s nitrogen business is exposed to headwinds from higher natural gas prices. Natural gas is a key component in nitrogen production costs. Nutrien is seeing a rise in cost of goods sold per tons for nitrogen as a result of higher natural gas costs. Higher gas costs may continue to impact the company’s nitrogen margins over the near term.

Nutrien also faces headwinds from elevated raw material costs. The company witnessed higher sulfur and ammonia input costs in the first half of 2022. Nutrien is expected to see continued pressure from raw material cost inflation.

Nutrien Ltd. Price and Consensus

Nutrien Ltd. price-consensus-chart | Nutrien Ltd. Quote

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Univar Solutions Inc. UNVR and Sociedad Quimica y Minera de Chile S.A. SQM.

Albemarle, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 37% in a year.

Univar, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 24.2% for the current year. The consensus estimate for UNVR's earnings for the current year has been revised 5.9% upward in the past 60 days.

Univar’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 27.6%. UNVR has gained around 6% over a year.

Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 98% in a year. The company currently carries a Zacks Rank #2.

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