How High Could Nutrien Stock Go in 2023?

Nutrien (NTR) stock has the potential to rally another 21% in price before 2023 comes to a close

| More on:
Hands protect a sprout in fertile soil.

Source: Getty Images

Global crop inputs and fertilizer giant Nutrien (TSX:NTR) has a cyclical business that could rely on export growth and a North American and Brazilian demand rebound to lift its stock price higher in 2023, even as fertilizer prices normalize internationally. How high Nutrien stock could go may depend on early 2023 earnings performance, management’s shareholder policies, the market’s evolving positive sentiment, and a potential valuation multiple expansion on the agricultural stock back to historical averages.

Nutrien stock has gained more than 9% in value so far this year. The company is a $56 billion business with a solid global footprint in the fertilizer and crop inputs market. Global stocks across 13 primary crops, excluding China, were at their lowest levels last seen in four years exit of 2022. Growers may need to plant new acres under crops to alleviate any supply shocks should there be any more disruptions in the near future. Nutrien’s business shall remain relevant for decades to come, and I’d buy shares any day.

Shares could rise more in 2023 to provide investors with sizeable capital gains.

Why I’d buy NTR stock for 2023 gains

Although the general market outlook is for fertilizer prices to stabilize and normalize in 2023, the company could continue to thrive in a normal market environment as it recovers lost customer volumes in North America, continues to consolidate its market share in Brazil, and retains robust export markets this year.

Nutrien reported record revenue, and gigantic earnings, and banked huge cash flows, as fertilizer prices skyrocketed in 2022 at the onset of the Ukraine conflict, which disrupted traditional commodity flows. Fertilizer supplies may remain tight, as the war rages on. Nutrien’s stable supply chain could help it retain strong export volumes this year.

In the near term, Nutrien’s stock price could respond to any unexpected news, as the company releases its fourth-quarter 2022 earnings results on February 16. A potential US$500 million goodwill write-down discussed in November could take effect; however, that risk is currently priced into NTR stock and could thus fail to drag investor sentiment any lower. But solid exports and a North American sales recovery could drive earnings higher and lift investor spirits.

Moreover, Nutrien has investor-friendly capital management policies. The company has committed to a share-repurchase program that reduces future equity claims on its cash flows and supports high NTR stock prices.

NTR stock will join the S&P/TSX Canadian Dividend Aristocrats Index on February 1. The index includes TSX stocks that have consistently increased their dividends every year over the past five years. Nutrien’s quarterly dividend yields 2.4% annually. Management raised the dividend by an average of 13.9% annually over the past half-decade. Shares can still fit well in a long-term dividend investing strategy.

How high could Nutrien stock go in 2023?

Nutrien’s stock price has the potential to soar by a further 21% to above $130 in 2023.

Market analysts forecast NTR’s revenue to decline by 10% sequentially from record highs in 2022 to around US$33.8 billion (CA$45 billion) this year. Normalized earnings should remain strong above US$5.8 billion (CA$7.7 billion) and GAAP earnings per share (EPS) may fall 21% sequentially to US$10.77 (CA$14.35). The unusually great times of 2022 are gone, but Nutrien’s revenue and earnings run rate will be significantly higher than what the market witnessed during pre-pandemic periods.

Most noteworthy, Nutrien’s net earnings margins could remain in the double-digit range in 2023. Net earnings margins soared from 5.1% in 2020, hit 13.2% in 2021, and surged towards 20% in 2022. Analysts expect net margins above 17% for 2023 to mark the third consecutive year of double-digit earnings margins. Free cash flow could be a record US$6.6 billion for the year.

Despite good earnings and cash flow outlook, Nutrien’s forward price-to-normalized EPS (P/E) multiple of 6.7 is far below the 2020 market crash levels of 11.4. Shares in this profitable cash monger appear too cheap to ignore.

A steady expansion in NRT’s P/E multiple just halfway toward 2020 lows could see an easy $130 Nutrien stock price print before 2023 comes to an end. Anything better could even see shares touching prior record highs near $150.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Paradza has no positions in any stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

More on Investing

Money growing in soil , Business success concept.

2 Great Dividend-Growth Stocks to Stash in a TFSA for Decades

CN Rail (TSX:CNR) and another dividend grower look cheap enough to own in a TFSA value fund for the long…

Read more »

Canada day banner background design of flag

Essential RRSP Stocks: 2 Canadian Picks to Secure Your Retirement

Two dividend stocks are ideal anchors for Canadians intending to contribute to their RRSPs in 2024 and save for retirement.

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.

5 Strategies for Maximizing Your CPP Benefits in 2024 and Beyond

Are you looking for the best way to max out your CPP benefits? Here are some tips you may not…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Better Artificial Intelligence Stock: UiPath vs.

Deciding between UiPath and isn't easy since both have strengths and weaknesses.

Read more »

data analyze research

The 1 Stock to Own in a Sideways Economy

Here's why Restaurant Brands (TSX:QSR) remains a top TSX stock investors shouldn't ignore for long-term gains in this market.

Read more »

Retirees sip their morning coffee outside.

Here’s the Average RRSP Balance at Age 65 and 71 in Canada

Canadian investors can consider holding dividend stocks and supplement their CPP and RRSP payouts in retirement.

Read more »

Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

sale discount best price
Energy Stocks

Time to Pounce: 1 Phenomenal TSX Stock That Hasn’t Been This Cheap in a While

Now could be the time to get into Cameco (TSX:CCO) stock, which is up 81% in the last year but…

Read more »