When it comes to the materials sector on the TSX, two heavyweights often come to mind. Those are Nutrien (TSX: NTR) and Methanex (TSX: MX). Both Canadian stocks play pivotal roles in their respective markets, but how do they stack up against each other? Let’s dive into their recent performances, future prospects, and what sets them apart.
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The stocks
Nutrien, headquartered in Saskatoon, Saskatchewan, is a global leader in providing crop inputs and services. In the fourth quarter of 2024, Nutrien reported net earnings of $118 million, translating to $0.23 per diluted share. For the full year, the company’s net earnings reached $700 million ($1.36 per diluted share), plus an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $5.4 billion. These figures, while robust, reflect a decrease from previous years, primarily due to lower net selling prices in their potash segment.
On the other hand, Methanex, based in Vancouver, British Columbia, is the world’s largest producer and supplier of methanol. In the fourth quarter of 2024, Methanex reported net income attributable to shareholders of $45 million ($0.67 per diluted share), up from $31 million in the previous quarter. The company’s adjusted EBITDA for the quarter stood at $224 million, with an adjusted net income of $84 million ($1.24 per diluted share). For the entire year, Methanex achieved a net income of $164 million, with an adjusted EBITDA of $764 million.
Performance
Over the past year, Nutrien’s stock has experienced a decline, dropping 24.5% in 2023 and an additional 13% in 2024. This downward trend can be attributed to various factors, including fluctuating crop prices and global economic conditions. In contrast, Methanex has shown resilience. The Canadian company recently agreed to acquire OCI Global’s methanol business for approximately $2 billion, a move expected to strengthen its market position and diversify its asset base.
Looking ahead, Nutrien has been proactive in returning value to its shareholders. The Canadian stock returned $1.2 billion through dividends and share repurchases in 2024 and declared a quarterly dividend increase to $0.545 per share. Additionally, the board approved the repurchase of up to 5% of outstanding shares under a renewed normal course issuer bid.
Methanex’s future outlook appears promising, especially with the anticipated benefits from the OCI acquisition. The company has also been recognized for its operational efficiency, achieving the best safety performance in its history in 2024. Furthermore, Methanex’s successful start-up of the G3 project is expected to contribute positively to its financial performance in the coming quarters.
Value and income
In terms of valuation, Nutrien’s trailing price/earnings (P/E) ratio stands at 35.8. This may be considered high, suggesting that the stock could be overvalued relative to its earnings. Methanex, however, has been showing improvements in its Relative Strength (RS) Rating, moving from 65 to 72, indicating strengthening stock performance.
Both Canadian stocks face challenges inherent to the materials sector, such as commodity price volatility and global economic shifts. However, strategic initiatives – notably, Nutrien’s focus on shareholder value and Methanex’s expansion through acquisitions – position each well for future growth.
Investors considering these stocks should weigh the potential risks and rewards. Nutrien’s strong market presence in agricultural inputs offers stability, while Methanex’s aggressive expansion and operational achievements present opportunities for growth.
Bottom line
In conclusion, both Nutrien and Methanex are formidable players on the TSX. The recent performances and strategic moves provide insights into the potential trajectories. As always, investors should conduct thorough research and consider their individual financial goals before making investment decisions.
