Nitrogen fertilizer producer CF Industries posted Q1 earnings late Wednesday that missed expectations, despite higher revenue. A doubling of natural gas feedstock costs vs. a year ago likely contributed, yet profit still soared 500% from a year ago.
On Monday, Mosaic and fellow fertilizer maker Nutrien reported mixed first-quarter results. But while Mosaic sees supply-chain issues continuing in Q2, Nutrien sharply raised full-year profit forecasts.
Also on Monday, pesticide leader FMC posted a solid earnings beat but trimmed guidance, pressuring the stock.
CF Earnings
Estimates: Analysts expected EPS of $4.35 on revenue of $2.59 billion.
Earnings: EPS rose 500% to $4.21, as revenue grew 174% to $2.87 billion.
Outlook: CF has yet to issue specific guidance but said market dynamics should remain "strong for the foreseeable future, with robust global nitrogen demand coupled with tight global nitrogen supply and wide energy differentials between North America and marginal production in Europe and Asia."
CF stock reversed lower Thursday and is still testing the 10-week moving average.
Fertilizer Stock Backdrop
All four stocks are part of the Chemicals-Agricultural industry group that is ranked No. 2 among the 197 IBD industry groups, based on price performance and momentum. The group had already been on a huge run when Russia's invasion of Ukraine sparked what looked like a strong rally.
A host of forces have contributed to a surge in fertilizer prices, including restrictions on exports from Russia, Belarus and Ukraine. A spike in natural gas prices, the feedstock for nitrogen-based fertilizer, and U.S. tariffs on supplies from Morocco have also contributed.
Now the fertilizer stocks have come down about 15%-20% from their peaks and are looking for support at their 50-day moving averages. A strong break would offer a sell signal. But a bounce could offer new buying opportunities.
So far, a number of analysts are sticking by the group because they see potential for a long earnings boom.
On Monday, Mizuho analyst Christopher Parkinson handed out big price target hikes to MOS stock (to 89 from 59), NTR (124 from 94), CF (120 from 81) and FMC (155 from 136). Parkinson sounded "a multiyear bullish call," but kept neutral ratings as he looks for a more appealing entry.
On March 7, when CF was featured as IBD Stock Of The Day, Piper Sandler analyst Charles Neivert explained his bullish outlook.
Despite a rare streak of five great crop years, global food insecurity is rising, he said. "We're running like hell just to stay in place."
But the inevitability of weaker crop yields and scarce inventories suggests higher corn prices are here to stay, even after the Russia-Ukraine conflict recedes, he says.
Mosaic Earnings
Mosaic earnings leapt 323% to $2.41 a share. Revenue ran up 71% to $3.92 billion, but undershot expectations amid a lower volume of shipments.
Mosaic said supply-chain issues "are only just beginning to abate." Still, Mosaic said it expects phosphate sales of 1.9-2.1 million tons in Q2 vs. 1.7 million in Q1. Potash sales should rise to 2.4-2.6 million tons vs. 1.8 million in Q1.
MOS stock jumped Tuesday on the earnings news but is now trading below the 10-week moving average.
Nutrien Earnings
Nutrien earnings skyrocketed 831% to $2.70 a share, with revenue up 64% to $7.66 billion.
Nutrien raised its full-year EPS guidance to $16.20-$18.70, up from $10.20-$11.80 prior guidance and ahead of consensus views of just above $15. It cited higher selling prices, increased potash volumes, higher retail crop nutrients and crop protection products gross margins. The EPS guidance also factors in at least $2 billion in NTR stock buybacks.
NTR stock popped 6.5% Tuesday, moving off the 50-day line, and is holding above the line.
FMC Earnings
FMC EPS jumped 23% to $1.88. Revenue grew 13% to $1.35 billion.
FMC stuck to its guidance range for full-year revenue growth at the midpoint of its $5.25-$5.55 billion range. However, FMC trimmed its EPS guidance range to $6.70-$8, down 10 cents at both ends. The company cited cost inflation, supply disruptions, foreign currency adjustment and its decision to cease operations in Russia.
FMC stock sank 6.3% on Tuesday, and continued sinking below the 50-day line.
