2023-07-24 14:28:11 ET
Nutrien ( NYSE: NTR ) +3.5% in Monday's trading as Wells Fargo upgraded the stock to Overweight from Equal Weight with an $82 price target, raised from $62, citing the potash producer's organic growth opportunity when the economic cycle turns.
Wells Fargo analyst Richard Garchitorena said he sees Nutrien ( NTR ) stock's underperformance vs. the chemicals sector as "an opportunity to add a best-in-class, quality ag play with [double-digit] organic growth potential when the cycle turns."
Key risks have abated, Garchitorena said, as "potash prices are closer to a floor, hard recession fears have eased, and a near-term resolution to the Russia-Ukraine conflict seems unlikely."
"With potash prices having declined ~50%-70% from the peak, and now likely 10%-20% from cash cost support, we see potash prices as largely de-risked, setting the stage for earnings leverage when prices improve," the analyst wrote.
Garchitorena also downgraded FMC Corp. ( NYSE: FMC ) to Equal Weight from Overweight with a $102 PT, cut from $142, believing the current channel destocking cycle makes exceeding the high end of EBITDA guidance of $1.3B-$1.4B "challenging," also with risks to 2024.
While still expecting FMC ( FMC ) to improve margins through its cost initiative program and lower raw material inputs, the analyst sees valuation as balanced at current levels.
More on Nutrien:
- Financial and valuation in comparison to sector peers
- Analysis: Nutrien: A Gloomy Outlook
- Stock price return: Down 8% YTD, down 19.5% in the past 12 months
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Nutrien upgraded to Buy at Wells Fargo as potash prices near a floor