NTR - Fertilizer stocks 'look cheap' amid supply disruptions: BofA

2023-05-01 13:27:37 ET

North American fertilizer makers such as CF Industries ( NYSE: CF ), Mosaic ( MOS ) and Nutrien ( NTR ) are undervalued as their pricing strength grows because of supply disruptions, analysts at Bank of America Securities said in a report Monday.

“Fertilizer distributors have deferred purchases for the last nine months, and in our view channel inventories are likely tight as spring applications in the Northern Hemisphere are underway,” Steve Byrne, analyst at BofA, said in May 1 report. “We believe fertilizer pricing could remain relatively stable from here.”

EBITDA multiples of five times for shares of fertilizer makers are “normally associated with peak earnings” and may be two times too low, according to BofA.

Fertilizer shipments are at a standstill in parts of the Mississippi River. The U.S. Amy Corps of Engineers last month closed multiple locks and dams to commercial traffic after near-record snow and rain in the Northern Plains caused major flooding. The locks are expected to be closed until through the first and second weeks of May.

“We expect fertilizer pricing in the corn belt could increase sharply in the next month, representing a meaningful opportunity for CF ( CF ), Mosaic ( MOS ) and Nutrien ( NTR ) that have wholesale terminals throughout the region, along with retail facilities for Nutrien ( NTR ),” according to BofA.

CF Industries ( CF ) is scheduled to report quarterly earnings today after the market close.

More on fertilizer makers

• Mosaic downgraded to Neutral at JPMorgan on profit outlook; stock falls
• Nutrien, CF Industries upgraded to Sector Outperform at Scotiabank

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