Mosaic vs. Nutrien: Which Agriculture Stock is a Better Buy?

Nutrien Ltd. (NTR) and The Mosaic Company (MOS) are two prominent players in the global agricultural inputs industry. NTR is a Saskatoon, Canada-based crop inputs and services provider that operates through Retail Ag Solutions; Potash; Nitrogen; and Phosphate. It distributes crop nutrients, crop protection products, seeds, and merchandise products through 2,000 retail locations. In comparison, Plymouth, Minn.-based MOS produces, and markets concentrated phosphate and potash crop nutrients. The company operates through Phosphates, Potash, and Mosaic Fertilizantes segments. It also provides nitrogen-based crop nutrients, animal feed ingredients, and other ancillary services.

With inflation rising to multi-decade highs, growing supply chain issues, and related labor shortages, the U.S. has witnessed a 6.3% rise in food prices over the past 12 months. The growing demand for food is increasing the demand for nutrients and fertilizers to yield better crops, thus creating a supply-demand imbalance and with it an increase in their prices of late. Some countries have even stopped exporting their crop nutrients to ensure their domestic availability.

However, integrating technology into seed science to produce genetically modified seeds, along with steps taken to address supply chain issues, should help produce better crop yields and promote sustainable agriculture. So, agricultural inputs producers should witness solid growth in the coming months. Investor interest in this space is evident in the iShares MSCI Global Agriculture Producers ETF’s (VEGI) 4.7% returns over the past six months versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. So, both MOS and NTR should benefit.

But while NTR gained 17.8% in price over the past six months, MOS has surged 31%. MOS is also a winner with 38.1% gains versus NTR’s 32.1% returns in terms of the past year’s performance. But which of these stocks is a better pick now? Let’s find out.

Latest Developments

On July 29, 2021, NTR and EXMAR, an independent shipping group that serves the international gas and oil industry, signed a collaboration agreement to jointly develop and build a low-carbon, ammonia-fueled vessel. The companies expect deep decarbonization of the maritime industry to be achieved before 2030.

In its November 2021 sales report, sales revenue from MOS’ Phosphates segment increased 49% year-over-year to $465 million, its sales revenue from its Potash segment increased 67.3% year-over-year to $271, and its sales revenue from its Mosaic Fertilizantes segment increased 102.1% year-over-year to $489 million. MOS is forecasting strong demand and sales in the coming months.

Recent Financial Results

NTR’s net sales for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 44.3% year-over-year to $5.80 billion. The company’s gross profit came in at $2.17 billion, up 112.5% from the prior-year period. Its adjusted EBITDA was $1.64 billion, representing a 145.1% rise from its year-ago amount. Its net earnings came in at $726 million for the quarter, compared to a $587 million loss in the prior-year period. Its EPS came in at $1.25 versus a $1.03 loss per share in the year-ago period. And the company had $443 million in cash and equivalents as of Sept. 30, 2021.

For the fiscal 2021 third quarter, ended September 30, 2021, MOS’ net sales increased 43.5% year-over-year to $3.42 billion. The company’s gross profit came in at $864.50 million, representing a 143.5% rise from the prior-year period. Its operating earnings were $701.60 million, up 612.3% from the prior-year period. And MOS’ net income came in at $371.90 million for the quarter, compared to a $6.2 million loss in the prior-year period. Its adjusted EPS increased 487% to $1.35. The company had $842.80 million in cash as of Sept. 30, 2021.

Past and Expected Financial Performance

NTR’s revenue and EBITDA have grown at CAGRs of 13.8% and 16.1%, respectively, over the past three years. The company’s total assets have increased at a 2.2% CAGR over the past three years.

NTR’s EPS is expected to grow 237.5% year-over-year in its fiscal year 2021, and 51.1% in fiscal 2022. The company’s revenue is expected to increase 31.3% year-over-year in fiscal 2021 and 14.2% in fiscal 2022. And its EPS is expected to grow at a 33% rate per annum over the next five years.

In comparison, MOS’ revenue and EBITDA have increased at CAGRs of 6.2% and 16.3%, respectively, over the past three years. And the company’s total assets have increased at a 1.1% CAGR over the past three years.

Analysts expect MOS’ EPS to grow 511.8% year-over-year in its fiscal 2021, and 39.4% in fiscal 2022. Its revenue is expected to grow 43.1% year-over-year in fiscal 2021 and 19% in fiscal 2022. And its EPS is estimated to grow at a 7% rate per annum over the next five years.

Valuation

In terms of non-GAAP P/E, NTR is currently trading at 11.46x, which is 48.6% higher than MOS’ 7.71x. In terms of forward EV/Sales, MOS’ 1.49x compares with NTR’s 1.99x.

Profitability

NTR’s trailing-12-month revenue is almost 2.1 times MOS’. However, MOS is more profitable, with a 16.4% net income margin versus NTR’s 9.6%.

Furthermore, MOS’ ROE, ROA, and ROTC of 18.7%, 6.2%, and 8.7%, respectively, compare favorably with NTR’s 10%, 4.3%, and 5.6%.

POWR Ratings

While NTR has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, MOS has an overall C grade, which equates to a Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

In terms of Momentum, both NTR and MOS have been graded a C, which is in sync with its mixed price performance over the past year.

NTR has a B grade for Growth. The company’s net income has grown at a 97.4% CAGR over the past three years. MOS’ C grade for Growth is in sync with its negative CAGR levered free cash flow growth over the past three years.

Among 28 stocks in the C-rated Agriculture industry, NTR is ranked #3, MOS is ranked #10.

Beyond what we have stated above, our POWR Ratings system has also rated NTR and MOS for Stability, Sentiment, Value, and Quality. Get all NTR ratings here. Also, click here to see the additional POWR Ratings for MOS.

The Winner

Surging demand for fertilizers and crop nutrients and technological advancements should enable NTR and MOS to grow their revenues in the coming years. However, we think better analyst sentiment makes NTR a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Agriculture industry.

NTR shares were trading at $69.12 per share on Tuesday afternoon, down $0.51 (-0.73%). Year-to-date, NTR has declined -8.09%, versus a -8.16% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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