Nutrien Ltd. (TSX: NTR) stock has had quite a ride. From the days of ultra low commodity prices sending its stock tumbling, to recent days of strong secular tailwinds giving the stock a boost. The one thing I can say for sure about Nutrien stock is that, today, it stands decidedly cheap, with a strong outlook.
Let’s take a look at what’s in store for Nutrien stock for 2025 and beyond.
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Nutrien stock is cheap
I’d like to start this article off by highlighting Nutrien stock’s valuation. It’s no secret that the company has had difficulty providing acceptable returns, cash flow growth, and earnings growth. As a result, the stock continues to disappoint. In fact, Nutrien stock has been pretty much cut in half since its 2022 highs.
But this is where it gets interesting. With the stock trading at a mere 14 times this year’s estimated earnings, we can see that there is not much optimism priced in. It’s all doom and gloom as investors seem to have given up on Nutrien stock.
Improvement plans to boost the bottom line
Looking ahead to 2025 and beyond, we can see that Nutrien’s management has taken steps towards improving the business. For example, the company implemented a cost savings plan in order to operate more efficiently and profitably.
In the company’s third-quarter conference call, management reported that the $200 million annual cost savings and efficiency target would be reached one year earlier than initially expected. This means by 2025. With this, there’s likely more to come in terms of cost savings. In fact, management is working on this opportunity as we speak, so we can expect to hear more about this soon.
The goal here is to keep Nutrien as the low-cost producer. And the company expects the business environment to continue to help it along in its goals, as supply/demand fundamentals are strong. For example, global inventories of crop inputs are below average levels in every market except Brazil. Also, China is consuming crop inputs at record levels.
Nutrien’s latest results show strength
In the first nine months of 2024, Nutrien reported record potash sales volumes. Also, its adjusted earnings before interest, taxes, and depreciation (EBITDA) was $4.3 billion. While EBITDA and earnings were down compared to the same period last year, these are signs of strength.
As a result, the company increased its full-year volume forecast and expects more growth in 2025. With limited growth in industry capacity expected, that is, limited supply growth, Nutrien is likely to benefit greatly.
We can expect the company to continue to drive increased volumes in 2025, as well as additional cost savings and operational efficiencies. Furthermore, the company is aiming to optimize investments and divest of any non-core assets that are not worth maintaining. As a result, free cash flow is likely to strengthen as the company focuses on high-value opportunities.
Nutrien’s attractive dividend yield
Despite all the problems that Nutrien has encountered over the last few years, its dividend has grown 35% since 2018. This is a testament to the company’s scale as the world’s largest provider of crop input and services. So in short, Nutrien stock is currently yielding a generous 4.1%. Add this to the stock’s low valuation and potential for a re-valuation higher and we have a very attractive opportunity.
The bottom line
2024 experienced record global potash consumption. If we add the supply side to this equation, the story becomes increasingly optimistic. Inventories remain at or below historical levels, with limited growth in capacity expected.
In summary, I expect good things from Nutrien and its stock in 2025. Its dividend yield is high and in my view, the stock price upside potential is also high.
