Nutrien (TSX:NTR) stock’s recent third-quarter (Q3) 2024 earnings report revealed both strengths and challenges, making it a stock worth considering closely as we look into 2025. The company posted earnings per share (EPS) of $0.39, which fell short of analyst expectations at $0.44. Meanwhile, revenue also came in slightly lower than anticipated at $5.35 billion. So, let’s dive in and see if it should make a comeback any time soon.
Hurdles
Over the course of this year, Nutrien stock has declined by about 10%, reflecting some of the hurdles it has encountered. This drop contrasts with the broader S&P 500, which has seen a gain, signalling that Nutrien stock’s challenges have created real headwinds. The stock’s current trailing price-to-earnings (P/E) ratio sits at 32.75. High for a company dealing with growth obstacles. However, the forward P/E ratio is more favourable at 11.95, suggesting that investors expect an improvement in earnings and profitability. This could make Nutrien stock a more attractive option moving forward.
Despite some short-term struggles, Nutrien holds a significant position as one of the largest global providers of potash, a key mineral in agriculture. Management is keenly aware of the importance of this role and has accelerated its timeline to achieve $200 million in operational efficiencies by 2025. This move should strengthen Nutrien’s competitive position, even as it navigates a high-cost operating environment. The company’s revised guidance to increase potash and nitrogen sales volumes also suggests confidence in its ability to maintain revenue stability in its core fertilizer segments.
The bright side
One of Nutrien stock’s bright spots has been its retail segment in North America, which achieved a 10% year-over-year growth in earnings before interest, taxes, depreciation, and amortization (EBITDA). However, this positive performance has been somewhat overshadowed by a slower recovery in Brazil and softer crop nutrient sales overall. Nutrien stock’s dependency on international markets, particularly Brazil, introduces an element of risk. Economic conditions abroad can directly affect its bottom line, making growth in certain regions more challenging.
Nutrien stock’s financial health remains reasonably strong, especially in terms of its cash flow and dividends. The company’s debt-to-equity ratio of 59% is manageable, given the substantial free cash flow it generates. Dividend-seeking investors may find Nutrien’s forward annual yield of 4.45% appealing. However, the high payout ratio of 145% does indicate that significant dividend growth may be limited unless profitability improves significantly. Nevertheless, this attractive yield could provide a steady income stream for shareholders as they ride out Nutrien stock’s current market challenges.
Improvements
Another notable development for Nutrien stock is its increased potash sales volume guidance. This it raised to a range of 13.5 to 13.9 million tonnes. This upward adjustment is an encouraging sign that Nutrien’s core product remains in high demand. Even if some other segments have faced pressure. However, nutrient prices in other segments, such as nitrogen and phosphates, have been less favourable. This means that while potash could drive profitability, other areas may lag, impacting the company’s overall growth.
In a bid to improve free cash flow, Nutrien stock plans to lower its capital expenditures in 2025 to around $2.1 billion, down from an expected $2.3 billion this year. This reduction aims to bolster the company’s financial flexibility, allowing for more strategic growth investments without overextending its finances. By optimizing capital expenditures, Nutrien stock hopes to maintain a solid cash position. And keep shareholders satisfied even as it navigates volatile markets.
Looking ahead
Looking to the future, Nutrien stock’s robust market position, operational efficiency initiatives, and strong dividend yield make it a solid choice for long-term investors who can tolerate some short-term fluctuations. For those focused on income, the dividend alone provides a compelling reason to hold onto the stock. Meanwhile, the company’s continued focus on strategic growth and cost-cutting offers promise for sustained value in the long run.
Right now, Nutrien stock represents a balanced mix of strengths and hurdles as we approach 2025. The company’s high yield, cost-cutting initiatives, and growth prospects in its core segments may make it worthwhile for current investors to “Hold.” New investors might consider waiting for more earnings stability before buying. Yet Nutrien’s future seems cautiously optimistic, with potential for both income and long-term growth.
