The war in Eastern Europe caused prices of fertilizers, grains, and oilseeds to surge. Prices have dropped after the initial aftermath of the conflict passed but remain at higher levels than in 2021. Russia has slowed down natural gas supplies in Europe, which could raise nitrogen fertilizer production prices. Moreover, the continued geopolitical headwinds could send prices higher once again.
Furthermore, a growing population, rising rural incomes, and an increasing need for enhanced soil nutrients coupled with increased crop yield are expected to boost the fertilizer market. The market is projected to reach $241.87 billion, growing at a CAGR of 2.4% between 2022 and 2030.
Given this backdrop, fundamentally strong fertilizer stocks CF Industries Holdings, Inc. (CF), The Mosaic Company (MOS), and ICL Group Ltd (ICL) might be solid investments before they soar based on the industry tailwinds.
CF Industries Holdings, Inc. (CF)
CF manufactures and sells hydrogen and nitrogen products for energy, fertilizer, emissions abatement, and other industrial activities. The company primarily serves cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users.
On June 8, CF’s subsidiary CF Fertilisers UK Limited announced proposals to restructure its operations in the United Kingdom to position the business for long-term profitability and sustainability and for the continuation of fertilizer, carbon dioxide, and other industrial product supply to its customers.
In May, CF and Mitsui & Co. Ltd (MITSY) announced their intention to jointly develop a blue ammonia production facility in the United States. "Our work with Mitsui has reinforced our shared belief that blue ammonia will play a critical role in accelerating the world’s transition to clean energy and that demand for blue ammonia will grow meaningfully in the second half of this decade," said Tony Will, president, and chief executive officer of CF.
CF’s net sales increased 173.7% year-over-year to $2.87 billion in the first quarter ended March 31. Its adjusted EBITDA grew 314.1% from the year-ago value to $1.65 billion, while its net earnings attributable to common stockholders improved 484.8% year-over-year to $883 million.
The company’s net earnings per common share increased 501.4% from its year-ago value to $4.21.
The consensus EPS estimate of $3.36 for the third quarter ending September indicates a 395.7% improvement year-over-year. The consensus revenue is expected to grow 71.6% from the prior-year period to $2.34 billion for the same period.
The stock has gained 102.1% over the past year and 34.9% year-to-date to close its last trading session at $95.49.
CF’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CF is rated an A in Growth and Quality. Within the Agriculture industry, it is ranked #5 out of 33 stocks. Click here to see additional POWR Ratings for Value, Momentum, Stability, and Sentiment for CF.
The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients worldwide. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes.
In May, MOS announced that its Board of Directors declared a quarterly dividend of $0.15 per share on its common stock. The dividend was payable to stockholders on June 16 and reflects upon the company’s ability of shareholder return.
MOS’ net sales came in at $3.92 billion for the first quarter ended March 31, representing a 70.8% year-over-year growth. Its operating earnings grew 301% from the prior-year quarter to $1.26 billion, while net earnings attributable to MOS rose 654.3% from the same period last year to $1.18 billion. The adjusted EPS increased 322.8% from the prior-year period to $2.41.
Analysts expect MOS’ revenue for the third quarter ending September 2022 to be $6.31 billion, indicating an 84.6% year-over-year growth. The company’s EPS for the same quarter is expected to increase 192% from the prior-year quarter to $3.94.
MOS has gained 68.6% over the past year and 34% year-to-date to close its last trading session at $52.66.
It is no surprise that MOS has an overall B rating, which translates to Buy in our POWR Ratings system. The stock has an A grade for Growth and a B for Value and Quality. It is ranked #6 in the same industry.
Beyond what we’ve stated above, we have also given MOS grades for Momentum, Stability, and Sentiment. Get all the MOS ratings here.
ICL Group Ltd (ICL)
ICL operates as a specialty minerals and chemicals company worldwide. It operates in four segments: Industrial Products; Potash; Phosphate Solutions; and Innovative Ag Solutions (IAS). The company is headquartered in Tel Aviv, Israel.
In July, ICL and PlantArcBio Ltd, an ag-biotech company, announced the development of a novel bio-stimulant technology platform, which is expected to improve crop yields while having a minimal impact on the environment.
Hadar Sutovsky, vice-president of External Innovation and general manager of ICL Planet, said, "This aligns perfectly with ICL's long-term goal of creating impact and sustainable growth in the agriculture end-market, alongside ensuring food security."
In the same month, ICL announced that it had signed a memorandum of understanding (MOU) with Aleees, a Taiwanese manufacturer, to produce lithium iron phosphate (LFP) battery cathode materials. This might bolster the company’s operations.
For the second quarter ended June 30, ICL’s total sales increased 78.1% year-over-year to $2.88 billion. Adjusted operating income grew 382.6% from the prior-year quarter to $1.14 billion, while adjusted net income attributable to shareholders rose 456.3% from the prior-year period to $751 million. The company’s EPS came in at $0.44, up 300% from the prior-year period.
Street EPS estimate for the fiscal third quarter (ending September 2022) of $0.46 reflects a rise of 178.2% year-over-year. Likewise, Street revenue estimate for the same quarter of $2.66 billion indicates an improvement of 48.6% from the prior-year period.
Over the past year, ICL’s stock has gained 24.5% to close its last trading session at $9.09. It has gained 1.6% intraday.
This promising prospect is reflected in ICL’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
ICL has an A grade for Growth and a B grade for Value and Quality. It is ranked #1 in the Agriculture industry. Click here to see the additional POWR Ratings for ICL (Momentum, Stability, and Sentiment).
CF shares were trading at $93.24 per share on Monday afternoon, down $2.25 (-2.36%). Year-to-date, CF has gained 32.79%, versus a -13.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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