Agribusiness is one of the underappreciated sectors in the stock market. Many investors overlook the companies that provide the essential inputs and services for global food production. However, these companies have a clear advantage over other sectors. One of the most important and profitable products in this sector is potash, a key ingredient in fertilizers that boosts crop yields and quality.
The global supply of potash is limited and facing challenges from environmental regulations, geopolitical tensions, and logistical disruptions. At the same time, the demand for potash is increasing, as the world needs more food to feed its growing population and cope with climate change. This creates a favorable scenario for potash prices, which have surged to multi-year highs in recent months.
Barclays, a leading financial institution, has recognized the potential of the potash market and issued a bullish note on two agribusiness stocks that are well-positioned to benefit from this trend. These stocks are Nutrien Ltd and The Mosaic Company, which are among the largest producers and distributors of potash and other crop inputs in the world. Barclays believes that these stocks offer attractive investment opportunities for stock investors and financial analysts, as they have strong fundamentals, competitive advantages, and growth prospects.
Nutrien (NTR: CA) is a global leader in crop inputs, producing potash, nitrogen, and phosphate fertilizers. The company has a market cap of over $6 billion and operates in 30 states. The company has a strong track record of profitability and is well-positioned to benefit from rising potash demand. However, the stock has fallen 19% this year and the 3Q23 results were disappointing. Nutrien Ltd reported:
- Revenue of $5.63 billion, down 31% y/y and $110 million below forecast.
- Adj. EPS of $0.35, missing the forecast by 29 cents.
Barclays upgraded Nutrien from Sell to Buy, with a $68 price target, implying a 20% upside. The analyst expects Nutrien to recover in 2024, driven by better potash demand and low-cost nitrogen production. The average price target is $73.36, suggesting a 30% upside.
The Mosaic Company:
The Mosaic Company (MOS: NYE) is a major US producer of potash and phosphate fertilizers. The company serves more than 40 countries and has 7 mines and 5 concentrate sites in North America, as well as facilities in South America. The company has been struggling in recent years due to weak potash prices, but Barclays believes that the tide is turning. However, the stock has dropped 34% this year and the 3Q23 results were below expectations. Mosaic reported:
- Revenue of $3.5 billion, down 34% y/y but $280 million above forecast.
- Adj. EPS of 68 cents, 7 cents below the average estimates
Barclays upgraded Mosaic from Sell to Buy, with a $42 price target, implying a 16% upside. The analyst expects Mosaic to improve in 2024, driven by better demand in Brazil and potash markets.
Investors looking for exposure to the agribusiness sector should consider Nutrien and Mosaic Company. These two companies are well-positioned to benefit from rising potash demand and are trading at attractive valuations. In short, Barclays is optimistic about the outlook for the agribusiness sector and believes that Nutrien and Mosaic Company are two of the best-positioned companies to benefit from rising potash demand.