Nutrien Earnings: Shares Fall as Middle East Conflict Resolution Will Alleviate Supply Shock

Key Morningstar Metrics for Nutrien

• Fair Value Estimate
  : C$116.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

What We Thought of Nutrien’s Earnings

Nutrien NTR reported solid first-quarter results, as higher potash and nitrogen prices drove strong profit growth. Shares were down 7% on May 7 as the market reacted to progress in negotiations to end the Middle East conflict, which would alleviate the nitrogen supply shock.

Why it matters: The Middle East is the largest exporter of nitrogen, typically accounting for over 30% of global exports. A reopening of trade through the Strait of Hormuz will reduce global nitrogen prices as fertilizer sitting at ports can make its way to export destinations worldwide.

• However, we see nitrogen prices remaining well above pre-conflict levels for the duration of 2026. Higher prices will be driven by lower production from the Middle East as multiple nitrogen plants are down.
• Natural gas production, the feedstock to make nitrogen, is also greatly reduced in the Middle East and will need to restart. We estimate it will take one to two quarters to restore production and potentially longer if any operations were damaged during the conflict.

The bottom line: We raise our fair value estimate for narrow-moat Nutrien to C$116 per share. At current prices, we view Nutrien shares as undervalued, trading around 20% below our updated fair value estimate and in 4-star territory.

• Our higher valuation is due to our weighted average cost of capital reduction to 8.0% from 9.5%, driven by a lower cost of equity assumption. Separately, we lowered our near-term potash price forecast and raised our near-term nitrogen unit production cost forecast for higher US natural gas prices.
• We forecast 2026 urea prices will average USD 650 per metric ton, over 50% higher than 2025. This is well below current spot prices, which were over USD 850 per metric ton in April based on World Bank data. We see prices moderating over the course of the year as supply returns to the market.