|Bid||0.00 x 1200|
|Ask||0.00 x 1200|
|Day's Range||65.79 - 66.28|
|52 Week Range||58.25 - 66.28|
|PE Ratio (TTM)||N/A|
|Expense Ratio (net)||0.54%|
MAP (monoammonium phosphate) prices last week continued their ascent unlike DAP (diammonium phosphate) prices, which we discussed in an earlier part of this series. At both Brazil and NOLA (New Orleans), MAP prices remained at an all-time high since the beginning of January 2016.
Last week, granular urea prices were broadly mixed. NOLA (New Orleans) experienced a weekly increase, while Brazil experienced sideways movement in prices from September 7. While prices in NOLA keep inching higher, prices in Brazil appear to have flattened with last week being the fourth consecutive week with almost flat prices.
The week ending September 14 was broadly positive for the agribusiness sector. The VanEck Vectors Agribusiness ETF (MOO) rose 2.8% week-over-week, and most of the fertilizer stocks also ended in the positive territory. During this period, the S&P 500 Index (SPY) rose 1.6% week-over-week.
Fertilizer Prices and Stocks Are on Pause: What's Going On? The Fertilizer Affordability Index, which is issued by Mosaic (MOS), is a single point measure to know where fertilizer prices stand compared to key fertilizer-consuming crops such as corn, wheat, and soybeans. The Fertilizer Affordability Index declined from 0.86x to 0.84x last week, which ended September 7.
Potash fertilizer prices at each of the four locations in the graph below remained flat week-over-week. However, they were still significantly higher year-over-year and at their peak level since January 2016. That explains why the potash segments of fertilizer companies (MOO) Nutrien (NTR), Mosaic (MOS), and Israel Chemicals (ICL) have delivered stable performances this year.
DAP (diammonium phosphate) prices were broadly mixed last week, which ended September 7. Phosphate prices in the United States were flat to positive, while prices in Morocco and Saudi Arabia declined. In other locations, DAP prices were unchanged from the week ended August 31.
Urea, the most common nitrogen fertilizer, has been on an upward trend in recent weeks. In the week ended August 31, urea prices made new highs at each of the locations in the chart below. Last week, which ended September 7, urea prices were broadly flat to positive at those two locations.
Last week, which ended September 7, the VanEck Vectors Agribusiness ETF (MOO) fell ~1.8%, while the broader market S&P 500 Index fell ~1%. Overall, fertilizer stocks also took a beating.
FMC (FMC) has struggled so far this year, underperforming the S&P 500 Index and the VanEck Vectors Agribusiness ETF (MOO). The overall consensus recommendation on FMC in September is a “buy.” Of the 16 analysts covering the stock, three have given it “strong buy” recommendations compared to four in August. Over the same period, the number of analysts recommending “buys” has fallen to nine from 11 a month ago.
The Mosaic Company (MOS) is another fertilizer company that has delivered a positive return this year alongside CF Industries (CF) and Israel Chemicals (ICL). Let’s look at what analysts recommend for the stock. The overall consensus recommendation for Mosaic in September is a “buy.” Of the 19 analysts covering the stock, four have maintained “strong buy” recommendations this month compared to last month.
Fertilizer stocks have performed well so far this year, and they continue to deliver higher returns compared to the S&P 500 Index (SPY), which has returned 7% YTD (year-to-date) as of September 6, and the VanEck Vectors Agribusiness ETF (MOO), which has returned 2.2% over the same period. Similarly, rhe Mosaic Company (MOS) has returned 14% over the same period as the commodity industry cycle has witnessed a reversal, with fertilizer prices improving. In our weekly price series, we update you on how fertilizer prices move each week, which can help determine the direction fertilizer stocks could take.
Potash prices, similar to the prices of nitrogen and phosphate, continued to gain momentum in the week ended August 31. Prices were at an all-time high last week at each of the four locations, which we’ll look at below.
MAP (monoammonium phosphate) prices have followed a trajectory similar to DAP and other fertilizer prices so far this year. While MAP prices have risen gradually in recent months, last week, which ended August 31, they reached new highs again at both Brazil and NOLA (New Orleans).
In this concluding part of the series, we’ll discuss analysts’ recommendations and price targets for the four fertilizer stocks that we’ve discussed in this series. The chart above shows that fewer analysts (MOO) cover Israel Chemicals (ICL), which is headquartered in Tel Aviv. The three analysts that cover the stock have a “hold” recommendation on it.
In this part, we’ll continue our discussion with a review of forward EV-to-EBITDA (enterprise value to earnings before interest tax depreciation, and amortization) of the four fertilizer companies (MOO) we reviewed in the previous parts of this series. Once again, Israel Chemicals (ICL) and Mosaic (MOS) are trading at a discount to the peer median. Israel Chemicals’ forward multiple stood at 8.5x, while Mosaic was trading at a forward multiple of 7.8x as of August 27.
The EBITDA (earnings before interest, tax, depreciation, and tax) metric is helpful in determining how much fertilizer companies’ (MOO) core earnings have improved. Since this measure excludes depreciation and amortization expenses, it is a more comparable measure since it takes away the high capital expenditure expense that fertilizer companies have. In the above chart, except for Israel Chemicals (ICL), the gross margins of the fertilizer companies are expected to expand in fiscal 2019, indicating that these companies could continue to see positive momentum in 2019.
In the previous part of this series, we saw that in the week ended August 24, fertilizer prices rose compared to the previous week. The Fertilizer Affordability Index issued by Mosaic (MOS) rose to 0.83x from 0.78x in the week ended August 17. While last week’s affordability remained well below one, it rose to a high since January 2016, making fertilizers less affordable over that period.
Yesterday, we published our weekly fertilizer price update for the week ending August 24. The increase in global fertilizer prices has certainly benefitted companies such as CF Industries (CF), Mosaic (MOS), Nutrien (NTR), and Israel Chemicals (ICL). With this backdrop, let’s look at how some of the major fertilizer companies are expected to perform in the next four quarters.
Potash prices last week, which ended on August 24, remained at an all-time high compared to levels for January 2016. Nutrien (NTR), Mosaic (MOS), and Intrepid Potash (IPI), along with other global players (MOO), have managed to ration their supplies, which appears to have benefited prices.
MAP (monoammonium phosphate) prices last week rose to a new high, similar to DAP (diammonium phosphate) prices. These prices confirm a strong momentum for fertilizer stocks such as Mosiac (MOS), Nutrien (NTR), and Israel Chemicals (ICL).
Urea prices continued to show strength last week, which ended on August 24. Urea prices have gotten a lift from a tighter supply environment on the back of higher energy costs in Europe and China. In its recent earnings call, CF Industries (CF) stated that it expects the supply to remain weak from Europe and China on the back of weak energy prices.
Last week, which ended on August 24, was broadly positive for the fertilizer sector, with the VanEck Vectors Agribusiness ETF (MOO) ending 1.3% higher than the week ended August 17. This agribusiness ETF also outperformed the overall market S&P 500, which ended higher by 90 basis points. Let’s see how fertilizer stocks performed last week.
CF Industries’ (CF) recent quarterly earnings seemed stronger after a string of quarters with negative EPS. Nutrien (NTR), Mosaic (MOS), and Intrepid Potash (IPI) saw similar trends as well. The company reported sales growth of 16% year-over-year in its second quarter due to the increase in realized fertilizer prices across its five segments.
In the fiscal third quarter, Deere & Company (DE) reported total revenue of $10.31 billion, inclusive of financial services and other revenue. Deere’s equipment business growth was primarily driven by its acquisition of Wirtgen Group, which added 17% to its revenue. Both of Deere’s reporting segments witnessed significant revenue growth.
In the previous part, we looked at analysts’ recommendations for Deere (DE). In this part, we’ll compare Deere’s valuation with its peer.