Up 6% After Earnings, Is Nutrien Stock Headed for Another Rally?

Nutrien (TSX:NTR) stock saw shares rise after reporting earnings, despite missing estimates. So, what happened, and will we see more?

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Shares of Nutrien (TSX:NTR) stocked jumped last week, as the company announced earnings. And yet, the company missed estimates for yet another quarter. The jump then came down to two announcements from Nutrien stock: a dividend increase and a share buyback.

So, could Nutrien stock be headed for another rally after this news?

What happened?

Shares of Nutrien stock jumped about 6% as the company announced last week it would be increasing its dividend by about 2%. This alone was definitely positive news for investors, with the company struggling over the last year with potash prices lower than in previous years.

The company also announced the authorization of a share-buyback program. Again, this helped the jump and could be helpful to increase share prices later. This happens thanks to decreased supply. Furthermore, the company reported an increase in cash flow. Therefore, the stock is able to support future growth and dividends.

However, again, Nutrien stock missed earnings estimates. And while cash flow was strong, a year-over-year increase in long-term debt could raise some concerns about the company. Furthermore, the stock price is about half of all-time highs. So, what should investors consider?

Look at it all

When it comes to investing in Nutrien stock, it’s important to consider everything — not just one quarter. The company does have some positives and negatives to consider, as well as its future outlook. There continues to be a growing demand for food. The population on earth isn’t going to shrink anytime soon, and that puts pressure on food production. Therefore, there continues to be heavy demand for the fertilizers Nutrien produces.

Furthermore, there is a limited supply of potash. Major producers tend to be concentrated in just a few regions. This helps increase the price, benefiting Nutrien stock. A stock that’s known for acquiring smaller businesses to get its hands on that finite resource.

The stock has also been reporting strong financials in recent quarters. Despite missing estimates, it really comes down to the price of potash. Even so, it remains with a solid balance sheet and financial strength to support more growth.

What to watch

The issues that have made Nutrien stock surge in the past are also ones that make the price drop as well. This includes commodity price fluctuation, as we’ve seen. Potash has been quite volatile in recent years, and, as we’ve seen, that impacts the profitability of the company.

Furthermore, we’ve seen that geopolitical issues also cause fluctuation. The ongoing war in Ukraine and other tensions have disrupted supply chains and could further hurt prices. And while the company remains a strong competitor, it’s not the only one. Therefore it will be clear investors need to keep an eye out on the stock for those edging in on its gains.

All taken into consideration, however, Nutrien stock as a company looks strong. While I don’t believe it’s headed for a huge rally quite yet, this growth does show confidence in performance. This means now could be a good time to hold a stake in the stock. Should potash prices turn around, we could see shares rise even higher for 2024.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

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