Nutrien Trends Higher On Results, Analyst Sentiment
Shares of Nutrien (NYSE: NTR) have been trending steadily higher since the pandemic bottom was put in in early spring 2020. That movement has been driven by a combination of results and analyst sentiment and we do not see that trend ending. The most recent earnings report blew past the consensus and came with very favorable guidance that drove the analyst to another round of increases. In our view, with the guidance and outlook for fertilizer so robust, there is an upside risk in the data. Even so, this stock is on track to set another new high very soon and it is still incredibly undervalued at only 6.7X its Pricetargets.com consensus estimate.
There have been 5 analysts' notes out since the earnings report was released including 5 increased price targets and 1 upgrade to Neutral. This puts the Pricetargets.com consensus rating at a weak Buy and trending stronger. Notably, this company has picked up 9 analysts since last year which is a driving force for this market. The consensus price target of $81.50 implies 7.6% of upside and we think that is the least to expect. Not only has the consensus been trending higher, up 57% in the last year and 9% in the last 90 days, but the bulk of recent targets has the stock trading another $10.00 higher and that doesn’t include the high price target.
The institutions have been iffy in regards to the stock but total holdings remain high at 62%. The activity, however, while vigorous, has been in slightly in favor of the bears for the last several quarters. What we can say about that is the selling is coincident with the stock trading at all-time high levels and offering profits greater than 100% relative to the COVID bottom. Who wouldn’t be selling at that time? If the selling picks up or persists it may be a problem, until then it’s something to keep an eye on.
Deep-Value High-Yield Nutrien Grows To Record Results
Nutrien reported $7.27 billion in net revenue for the 4th quarter which is 80% above last year's level and beat the consensus estimate by more than 1000 basis points. The revenue strength carried down to the bottom line as well with earnings of $2.47 up $2.23 from last year and $0.09 better than expected on higher than expected demand for potash and other crop fertilizers. Sales were impacted by volume as well as pricing and both are expected to remain strong in 2022. The guidance is calling for earnings of $10.20 at the low end of the range and there is considerable room for upside performance. This compares to the $9.53 consensus estimate and does not include the company’s plans for share repurchases. The company is planning to repurchase as much as 10% of the float over the next year.
Nutrien pays a nice 2.5% dividend yield while trading near $75. This is worth less than 30% of the company’s earnings and is supported by a healthy balance sheet, a robust share repurchase plan, and an outlook for strong results this year. In our view, the company is set up to extend its 3-year history of dividend increases to 5 or 10 years with little trouble. We are sure that is a factor driving analysts' sentiment.
The Technical Outlook: Nutrien Is Trending Higher
Shares of Nutrien are trending higher on results, outlook, and analyst sentiment and we don’t see that trend ending. The post-release price action has been lackluster but is still well within expected limits and in no danger of breaking the trend. At worst, we are expecting a pullback to trend, possibly as deep as the $70 level, before resuming upward movement and moving on to set new highs.
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