Shares in newly formed Canadian fertilizer giant Nutrien Ltd. rose on its second day of trading Wednesday after CIBC assigned it an “outperformer” rating and set a 12-month price target of US$62.
The bank, which had been restricted from comment because it had acted as an adviser to Agrium Inc. leading up to its merger with Potash Corp. of Saskatchewan Inc., said in a report from analyst Jacob Bout that Nutrien (TSX:NTR) has likely been “sandbagging” its estimate of US$500 million in cost-saving synergies from the deal.
The research note says there are possibly US$100 million in incremental savings that will be realized if the new company doubles its retail footprint – growing to grab a third of the U.S. market compared with about 19 per cent now – and more if it successfully rationalizes its wholesale operations.
The report says it could realize US$125 million in additional cost savings by reorganizing its potash assets. Along with about US$5 billion in proceeds from selling equity investments, the savings should allow the company to return cash to investors through share buybacks and dividends.
WATCH BELOW: Two largest potash companies in Saskatchewan merge into Nutrien
The shares, which started out at US$52.25 on Tuesday in New York, rose to US$55.18 by 2 p.m. ET on Wednesday on the New York Stock Exchange.
According to Thomson Reuters, Laurentian Bank Securities and Bernstein rate Nutrien “buy” and “outperform,” respectively, while BMO assigned it a “market perform” rating.