Nutrien Sinking 4% Despite Earnings Beat On Strong Potash Sales

Shares in Nutrien (NTR) are falling 4% in Tuesday’s pre-market trading despite the Canadian fertilizer company posting solid results for the third quarter.

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Nutrien, the largest producer of potash and the third largest producer of nitrogen fertilizer in the world, reported Q3 Non-GAAP EPS of $0.23. That beat Street expectations by $0.11. However GAAP EPS of -$1.03 fell short of consensus by $1.12.

Revenue of $4.21B sunk 11% from the same period last year, but nonetheless came in $380M above Street expectations. The Retail segment was slightly better than expected ($162M EBITDA), primarily due to better sales of higher-margin products in the Merchandise and Services sub-segments.

Meanwhile Potash sales volumes were significantly higher than expected (3.7Mt) due to strong offshore shipments and higher US demand, and realized prices were also slightly better (at $167/tonne). Nitrogen sales were in line with expectations, with Phosphate EBITDA also in-line as lower realized prices were offset by lower costs.

“Nutrien delivered another quarter of solid operating results with strong fertilizer sales volumes and exceptional growth of orders through our digital agriculture platform, surpassing $1 billion of sales” commented Chuck Magro, Nutrien’s CEO.

“Market conditions are improving around the world with higher crop and fertilizer prices, lower expected inventories and strong demand for crop inputs as we finish the year and enter 2021,” he added.

For the full year, NTR tightened 2020 adjusted net earnings guidance to $1.60 to $1.85 per share (from $1.50 to $1.90 per share previously) and adjusted EBITDA guidance to $3.5 to $3.7 billion (from $3.5 to $3.8B previously, and in-line with consensus). It lowered its Retail and Nitrogen segment EBITDA, offset by higher Potash segment EBITDA.

Following the report RBC Capital’s Andrew Wong reiterated his NTR buy rating and $47 price target. “We view the quarter and updated guidance as in line with expectations; although EBITDA was higher than our estimate, this was mostly due to potash sales timing” he explained.

Overall, Wong remains positive on Nutrien as a diversified ag input provider with strong execution and growing FCF generation. “We note better potash market conditions and improving farm economics due to strong crop prices, although the recent rise in natural gas input costs and relatively sluggish nitrogen market are partial offsets” the analyst told investors. (See NTR stock analysis on TipRanks)

Shares in Nutrien are down 13% year-to-date, and the stock scores a cautiously optimistic Moderate Buy Street consensus. Six buy ratings are offset by three hold ratings. Meanwhile the average analyst price target of $48 indicates 8% upside potential lies ahead.