Down 52% From All-Time Highs, Is Nutrien Inventory a Good Purchase?

Valued at $34.3 billion by market cap, Nutrien (TSX:NTR) offers crop inputs and providers. It operates by 4 enterprise segments:

• Retail: It distributes crop vitamins, crop safety merchandise, seeds, and merchandise merchandise.
• Potash: It offers granular and normal potash merchandise.
• Nitrogen: It affords ammonia, urea, nitrogen options, nitrates, and sulfates.
• Phosphate: It offers stable fertilizer, liquid fertilizer, and industrial and feed merchandise.

The corporate offers providers on to growers by a community of farm facilities within the Americas and Australia. Nutrien went public in early 2018 and has since returned 26% to shareholders after adjusting for dividend reinvestments. Comparatively, the TSX index has returned over 70% to shareholders since Nutrien’s preliminary public providing.

Down 52% from all-time highs, Nutrien affords shareholders a ahead dividend yield of over 4%, given its annual payout of $2.96 per share. Let’s see if Nutrien inventory is an efficient purchase proper now.

Is Nutrien inventory a superb purchase proper now?

Nutrien operates an in depth crop inputs and providers ecosystem with low-cost upstream manufacturing property, a world provide chain, and a downstream retail channel. Its differentiated enterprise mannequin is centred on the corporate’s capacity to effectively produce and distribute the services and products required throughout key agriculture markets across the globe.

Nutrien has targeted on prioritizing initiatives that improve its capacity to serve farmers in core markets whereas enhancing earnings and money circulation.

For instance, Nutrien has prioritized investments to boost its North American fertilizer manufacturing property and product capabilities to strengthen its international distribution community and develop in core downstream retail markets.

Additional, Nutrien is accelerating operational effectivity goals by the deployment of automation and different initiatives in potash. It’s also optimizing the downstream retail community by modernization and consolidation initiatives in North America and a focused margin enchancment plan in Brazil.

A concentrate on scalable progress

Nutrien is concentrating on potash and nitrogen gross sales quantity progress of between two to a few million tonnes by 2026 in comparison with 2023. It additionally expects retail adjusted EBITDA (earnings between curiosity, tax, depreciation, and amortization) between $1.9 billion and $2.1 billion in 2026, which features a objective of $1.4 billion in gross margin from its proprietary merchandise portfolio. Mainly, Nutrien goals to make the most of aggressive benefits to ship scalable progress.

Amid a difficult macro backdrop, Nutrien intends to cut back controllable prices throughout its operations by $200 million by 2026 and make investments between $2.2 billion and $2.3 billion in direction of capital expenditures by 2026.

What’s the goal value for Nutrien inventory?

Nutrien is a part of the agriculture sector, which is pretty recession-proof. Nevertheless, it additionally trades in commodities, making it extremely cyclical. The inventory gained vital tempo amid an inflationary surroundings, rising over 100% between late 2020 and April 2021.

As commodity costs cool off, analysts count on Nutrien to report adjusted earnings per share of $5.33 under earnings of $6.07 per share in 2023.

Priced at 13 instances ahead earnings, Nutrien inventory is kind of low cost, given its excessive dividend yield. Analysts, too, stay bullish and count on the inventory to surge 30% within the subsequent 12 months.