Fertilizer stocks are on the verge of another big move.
The supply chain hiccups following the Russia-Ukraine war have resulted in a massive surge in fertilizer prices. Multiple countries across the globe are limiting their reliance on Russia for their fertilizer needs while focusing on domestic production.
Consequently, Moscow replied with its own restrictions on fertilizer exports. Therefore the domestic fertilizer sector is likely to grow rapidly, pushing fertilizer stock to new heights.
The global fertilizer market is expected to grow substantially, in line with population expansion. The market is expected to grow at a remarkable 3.5% to reach $251.6 billion by 2030. Having said that, let’s look at three of the top fertilizer stocks to bank on this year.
Mosaic (NYSE:MOS) is an innovative leader in the fertilizer business. Its urea collection, international distribution networks, and robust reputation as the largest U.S. potash and phosphate producer make it one of the top fertilizer stocks to buy.
Moreover, its expansive reach and impressive portfolio pave the way for sustainable food production.
Its bull-case hinges on its solid fundamentals, healthy dividend payouts, and an attractive valuation. Its stock trades at roughly 4.2 times forward earnings, approximately 70% lower than its 5-year average. Moreover, it offers its investors a relatively strong dividend yield of 1.7%, with 11 consecutive years of payouts.
Furthermore, the firm boasts eye-catching fundamentals marked by impressive top and bottom-line expansion. Its revenue and EBITDA have grown by 17.8% and 50.4%, respectively, over the past five years.
With the strength in the fertilizer market, it has outperformed across both lines and is expected to keep up the momentum for the foreseeable future.
CF Industries (CF)
CF Industries (NYSE:CF) remains one of the largest U.S.-based fertilizer manufacturers with an amazing track record of growing its sales and earnings.
It’s coming under selling pressure of late due to declining fertilizer prices. However, its in a pole position to benefit from the supply/demand imbalance, making the most of the lack of capacity in Europe.
CF’s third-quarter results were exceptional. Its net sales showed a 70.4% year-over-year increase, with net earnings and EPS rising 336.8% and 353.5%, respectively. There was also an impressive 101.4% year-over-year increase in adjusted EBITDA to $983 million.
Its been arguably the top performer in the sector while trading at just 4 times forward cash flows. Its excellent dividend portfolio will continue to excite investors and shareholders alike, especially as its heads toward another prosperous year in 2023.
Nutrien (NYSE:NTR) has been making waves in the industry since its inception. It has quickly become the top potash producer and the third-largest nitrogen fertilizer producer globally.
This incredible success is supported by over 2,000 retail locations and an impressive 23,500 employees.
Last year was a challenging one for Nutrien, given the compressed planting season that distorted the potash demand. Despite this, inventories still fell, and Nutrien anticipates the sector replenishing its inventories, particularly in North America and Brazil.
Farmers were discouraged from buying Nutrien products during this period because fertilizer prices were not attractive enough. But with new price incentives, farmers are now ready to restock to prepare for the upcoming application season. Nutrien is looking forward to major gains for 2025 as it ramps production towards a target of 18 million tons.
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