- Nutrien (NYSE:NTR): potash production giant benefits from strong end markets
- ICL Group (NYSE:ICL): undisputed leader in production trading at under 2.5 times sales
- CF Industries (NYSE:CF): robust financial positioning with massive cash flow growth
- Yara International (OTCMKTS:YARIY): outstanding fundamentals with an incredible dividend yield
- CVR Partners (NYSE:UAN): dividend king with a spectacular yield
- LSB Industries (NYSE:LXU): continued strength in agricultural markets will keep boosting top-line growth
- Intrepid Potash, Inc. (NYSE:IPI): free cash flows will continue growing at a rapid pace for this cyclical stock
Investors are piling into fertilizer stocks for several good reasons. The war in Ukraine has had significant ramifications for the global fertilizer industry.
Fertilizer prices have catapulted to multi-year highs amidst Western sanctions on Russia. Russia and its allies, including China, account for the bulk of fertilizer production. Moreover, the shipping disruptions due to the war have led to a sharp increase in natural gas prices.
Fertilizer businesses are caught in a perfect storm. Besides the war in Ukraine, severe storms in the United States have affected nitrogen production, a key element of fertilizer manufacture. The hike in oil and gas prices has slowed down the market, complicating matters further.
The VanEck Agribusiness ETF (NYSEARCA:MOO) has been up more than 9% in the past 30 days, outpacing the S&P 500 index growth. The markets will continue to show strength and offer healthy returns as we advance. Having said that, let’s look at seven fertilizer stocks to benefit from sector tailwinds.
|Intrepid Potash, Inc.||IPI||$108.20|
Fertilizer Stocks to Buy: Nutrien (NTR)
Nutrien is one of the leading agrochemicals producers, manufacturing some of the core elements required to produce fertilizers.
Its business has been booming, with revenue growth at roughly 34% year-over-year. Its sales have grown by more than 40% in the last couple of quarters. Moreover, its robust end markets and increased potash prices will likely result in an incredible showing again this year.
Nutrien bumped its guidance for potash estimates by 5% from 14.3 million tonnes. It expects demand to remain elevated this year, resulting in a healthy increase in operational cash flows. The excess supply, if any, will come later in the year, which could impact margins. However, sparking results are expected for the better part of the year.
ICL Group (ICL)
ICL Group is a specialty chemical firm and a global leader in bromine production.
It accounts for more than 40% of the total production of elemental bromine and has been consistently increasing its market share in the business.
Moreover, it is among the few companies which have consistently paid dividends in the sector, yielding an amazing 4.4%.
The group’s top and bottom-line results in the past year have been sublime. The year’s revenue and EBITDA growth were at a phenomenal 38% and 112%, respectively.
In 2021 it produced 182,000 tons of bromine, a 7.1% increase from the same period last year. The rising demand for its products from various sectors across the globe and the launch of new projects have contributed to its positive results lately.
Despite its rock-solid fundamentals, it is one of the more attractively valued stocks, trading at just 2.2 times forward sales.
Fertilizer Stocks to Buy: CF Industries (CF)
CF Industries produces nitrogen and hydrogen products for multiple industrial activities, including fertilizers.
Demand for its products remained strong last year, and the higher selling prices significantly widened its margins. That made 2021 a fantastic year for the business, with its top and bottom-line results improving by double-digits.
Moreover, with the effective operating leverage, cash flows on a year-over-year basis soared to 133%.
CF Industries’ strength lies in its robust balance sheet, which shows a colossal cash balance of $1.6 billion. In the past 12 months, it has reduced its net debt position by more than 50% and taken its free cash flow balance to $2.17 billion .
Moreover, its free cash flow per share rose to $5.50 from $4.30 in 2020. Hence with such a stable financial positioning, the company can effectively push on and take advantage of the conduciveness of its external environment.
Yara International (YARIY)
Yara International is a Norway-based producer, distributor, and seller of nitrate, ammonia and complex fertilizers.
Its been one of the most consistent performers in its sector, with its financials firmly in the green for over a decade. In its most recent quarter ending in December, its revenues and other income climbed to $5.03 billion, a 72% increase from last year.
Yara benefits from strong prices, which have helped significantly improve gross and operational margins.
Analysts expect revenues to grow to $5.56 billion for the upcoming quarter, representing a massive 75.6% increase from the prior-year quarter.
Though its bottom line is being tested, the strength in its selling prices has been more than enough to offset the rising costs. Investing in the stock comes with a sensational 4.7% dividend yield to further sweeten the deal.
Fertilizer Stocks to Buy: CVR Partners (UAN)
CVR Partners is one of the leading producers of urea ammonium nitrate and nitrogen fertilizers ammonia globally.
The disruptions in supply and strong demand have helped boost its margin and its peers. As a result, its financial results have been stellar in the past year with double-digit top and bottom-line expansion.
The company recently announced a quarterly dividend of $5.24 per share, a 78.8% increase from the previous dividend of $2.93 per share.
The company has been a dividend king among its peers, and the announcement now takes its forward yield to a mind-boggling 20.5%. In addition to this, it has reduced its outstanding debt by a hefty $95 million, which has strengthened its financial leverage considerably.
LSB Industries (LXU)
LSB Industries is another agro-chemicals company specializing in nitrogen-based fertilizers.
It has struggled for consistency in the past several years, but the recent sector tailwinds have helped it flip the script. It recently released its fourth-quarter results, where sales shot up 114% from the previous year.
The company recorded a recorded adjusted EBITDA figure of $90.1 billion compared with $10.4 million during the same quarter last year. Additionally, its liquidity after the quarter was $180 million.
As we advance, the company is looking at continued strength in agricultural markets, which currently represent the lion’s share of its revenues. Moreover, its business verticals such as ammonium sulfate are in for sustained growth for the foreseeable future.
Intrepid Potash, Inc. (IPI)
Intrepid Potash, Inc. is a North American potash producer, a key ingredient in the production of fertilizers.
Its operations in the U.S. benefit from low input commodity costs compared with its European counterparts.
IPI is more of a cyclical stock, and the current conditions are one where it is expected to thrive.
Hence, in the past year, we have seen how its free cash flows have jumped to $60 million compared with $14 million in 2020.
Potash prices have been growing at a healthy pace of late, resulting in substantial operating and revenue margin expansion. Intrepid’s business is in excellent shape with zero debt to continue oozing free cash flows and growing at a rapid clip.
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.