3 Fertilizer Stocks Set for Serious Growth Amid Shortage Scare

fertilizer stocks - 3 Fertilizer Stocks Set for Serious Growth Amid Shortage Scare

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A casual observer could be excused for wondering why are fertilizer prices so high, but the Russia/Ukraine war has had an unsettling impact on the farming sector. With both countries being major producers of agricultural additives, the market has become incredibly jittery over the likely supply shortage. As a result, fertilizer stocks are on the rise, making it an excellent time for investors to profit.

Russia is currently the world’s biggest fertilizer exporter. One of its key allies, China, accounts for almost 30% of the global exports of nitrogen-based plant food. Moreover, shipping disruptions have led to a massive upsurge in natural gas prices due to the war. Natural gas is one of the core ingredients of fertilizer manufacturing. On top of that, sanctions against Russian banks will considerably constrain financing.

Nevertheless, companies involved in producing and selling plant-based food are likely to prosper immensely from the situation. Here are three which are perhaps the best bets amidst the fertilizer scarcity.

  • Nutrien (NYSE:NTR)
  • ICL Group (NYSE:ICL)
  • CF Industries (NYSE:CF)

Ag stocks are regaining from three-year lows. (see chart below) The VanEck Agribusiness ETF (NYSEARCA:MOO) is up about 3% year-to-date compared to the S&P 500 index’s 10.6% decline. That 57-stock exchange-traded fund includes both Nutrien and CF Industries among its top 15 holdings of a basket of farming-related names.

Price chart of fertilizer stocks
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Source: Koyfin

Fertilizer Stocks to Buy: Nutrien (NTR)

A tractor spreading fertilizer over a farm field.
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Shares of Saskatoon, Saskatchewan-based fertilizer and agrochemicals giant Nutrien have witnessed impressive momentum over the past month. The Russian invasion of Ukraine stoked a healthy bump in NTR stock. The company is in position to take advantage of the nitrogen and potash disruption in the European region.

In its recently released fourth-quarter and full-year results, Nutrien delivered revenue growth of 79% to $7.26 billion. Adjusted EBITDA shot up 220% to $2.46 billion. Its sales grew 33% to 27.7 billion for the whole year from the prior-year period.

Net earnings grew a spectacular 593% to $3.17 billion with an incredible 94% growth in its EBITDA. Free cash flows climbed over 120% to $4.3 billion. The company’s robust end markets and the spike in potash prices will likely result in another strong showing this year.

ICL Group (ICL)

Tractor spraying pesticides on soybean field with sprayer
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ICL Group is another juggernaut in the fertilizer business and a leader in bromine production. With rising inflation and sanctions against Russia, the company benefits immensely from the booming demand for its products. It has performed spectacularly over the past couple of years due to rising raw material prices, the launch of new products and increasing demand from various sectors.

Its performances of late have been remarkable as well. It earned a whopping $2 billion in revenues during the fourth quarter, up almost 55% from the same period last year in 2020. On top of that, gross margins came in at 42.1% and were among the top in its field.

The company’s efficiency in managing its business in a competitive industry is highly remarkable. Moreover, it boasts a highly attractive forward dividend yield of 5.36%, with a solid track record of growing its payouts over the past several years.

Fertilizer Stocks to Buy: CF Industries (CF)

Image of a tractor cultivating field
Source: Shutterstock

CF Industries stock has been gaining from the rising demand  for nitrogen fertilizer across major markets. Like its peers, it’s been buoyed by robust agricultural demand and high nitrogen consumption across various industries. Therefore, it’s expected to perform impressively for the foreseeable future.

The company’s financials have been impeccable over the past year. It recorded a massive earnings jump, where the figure increased almost threefold from the prior-year period to $917 million. Moreover, revenue grew by 58.5% on a year-over-year basis, head and shoulders above its five-year averages.

Additionally, its levered cash flow growth has increased by triple-digits to 145.4% in the past year. CF stock is trading at just 2.2 time’s forward sales, presenting a solid investment case.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


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