Shares of Canadian fertiliser giant Nutrien (TSX:NTR) jumped last week. It’s worth pointing out that the company recently reported results that showed it once again missed expectations for the most recent quarter. The stock’s rise was driven by two pieces of news: a dividend hike and a stock buyback.
So, will the price of this Canadian agriculture stock continue to rise?
Nutrien announced a dividend hike of about 2% last week, and the news pushed the company’s shares up nearly 6%. This is certainly good news for investors, as the company’s stock has struggled over the past year due to lower potash prices. The company also announced a share buyback programme.
This also helped drive the stock price and may help it rise later on. Nutrien is in a position to support future growth and dividends as it has reported increased cash flow.
However, the year-on-year increase in long-term debt may be a cause of concern for some investors.
Additionally, the company’s current share price is nearly halved from its all-time high. Is this a buying opportunity for investors?
In stock investing, one should think more about the big picture rather than one or two quarters. The company does have some good news and bad news to consider, but one thing that is undeniable is that the demand for food will continue to grow. The population of the planet is not going to decrease anytime soon, which puts pressure on crop production. As a result, the demand for fertilizers produced by Nutrien will remain high.
In addition, the supply of potash is limited. Major producers tend to be concentrated in a few regions, which helps to increase the price of the commodity, benefiting Nutrien stock.
While the earnings report missed expectations, the price of potash was indeed key. Even so, the company still has a solid balance sheet and financial strength to support additional growth opportunities.
Potash prices have been volatile in recent years, which has impacted the company’s profitability. And geopolitical issues are expected to continue to cause price volatility.
The ongoing war in Ukraine and other tensions have disrupted the supply chain and could hurt prices further. While the company remains a strong competitor, it is not the only one. As such, investors will obviously need to keep a close eye on the stock’s rally.
All taken into consideration, however, Nutrien stock looks strong. While the stock is unlikely to rally significantly, the recent rise does show confidence in performance. This means that now is a good time to hold the stock, and if potash prices show improvement, the share price could rise even higher in 2024.
