Nutrien shares jump on strong Q2 results despite ‘worst’ U.S. planting season

Shares in Canadian fertilizer giant Nutrien Ltd. jumped by as much as 8.6 per cent Tuesday after it posted strong second-quarter results despite what it called the “worst U.S. planting season in history.”

The company cut its estimate for 2019 adjusted earnings by about five per cent to account for the impact of severe wet weather that prevented planting of corn fields in some of its key U.S. markets.

“Nutrien’s integrated business model is designed to withstand events such as what happened this spring,” said CEO Chuck Magro on a conference call on Tuesday.

“It’s also designed to capitalize on a long-term recovery in the ag markets, which we are starting to see positive signs (of) in the second half of 2019.”

Nutrien shares were trading at $72.22 at 12:30 p.m. EDT, up $5.67 from Monday’s close.

The Saskatoon-based company created by the merger of Potash Corp. and Agrium Inc. in early 2018 — which reports financial results in U.S. dollars — says it now estimates this year’s adjusted net earnings will be between $2.70 and $3 per share.

That’s down from between $2.80 and $3.20 per share in its previous guidance for 2019.

Financial analysts applauded the company as it reported second-quarter net income from continuing operations of $858 million or $1.47 per share on $8.66 billion of sales, versus $741 million or $1.17 on $8.1 billion in sales a year earlier.

“Nutrien’s 2Q19 results offer a brilliant proof point regarding the platform’s embedded resilience, in our view,” said analyst Steve Hansen of Raymond James in a report.

“Indeed, despite facing one of the worst U.S. springs on record (unprecedented wet weather/flooding, acreage loss), NTR still managed to grow consolidated adjusted EBITDA by more than 16 per cent year-over-year.”

Nutrien reported strong prices for potash and nitrogen products in the quarter, noting that while potash volumes were up, nitrogen volumes fell.

It cut its 2019 potash sales volume guidance to a midpoint of 12.8 million tonnes from 13.2 million, citing effects of the North American spring weather, concerns about Chinese import policies due to its ongoing trade battles and lower expected demand in India because of a below-normal monsoon.

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On the call, Magro pointed out Nutrien purchased 21 million of its own shares in the second quarter. It thus completed its five per cent buyback program in less than four months, retiring 36 million shares for $1.88 billion.

It announced Tuesday a two-cent increase in its quarterly dividend to 45 cents per share.

“On these two fronts combined, we have returned $5.2 billion to shareholders since the close of the merger,” he said.

Magro was noncommittal when asked on the call about starting a new buyback program, pointing out the company is seeing good asset purchase opportunities and wants to be prepared to make quick decisions.

Nutrien said it expects to achieve its target of over $650 million in annual cost synergies from the merger by the end of this year.