The crop vitamins market is normalizing to mid-cycle ranges in 2023. Market merchants might by no means see the document fertilizer costs of the previous 12 months once more quickly. Nevertheless, Nutrien (TSX:NTR) inventory is an all-weather, cash-flow-rich, dividend-growth inventory that can proceed to nourish earnings and capital progress wants in traders’ long-term retirement plan portfolios.

Nutrien inventory is caught up in a detrimental momentum spiral this 12 months. Shares commerce 42% under their all-time highs reached in 2022.

Income is declining off final 12 months’s peak, working earnings margins are shrinking, and Nutrien’s cash-flow-generating energy has waned in 2023. Nevertheless, a have a look at the larger image may establish Nutrien inventory as purchase after first-quarter (Q1) 2023 earnings.

Nutrien’s combined bag Q1 earnings

Nutrien’s Q1 income dropped by 20% 12 months over 12 months to US$6.1 billion, reflecting a normalized agricultural crop inputs market. Crop nutrient costs have normalized again to midcycle ranges, because the fertilizer market cools off a 12 months after the onset of a disruptive Russia/Ukraine battle. Nevertheless, quarterly internet earnings of US$576 million have been the second highest of any Q1 earnings on document.

Gross and working margins shrank, as realized costs decline to normalized ranges, and the corporate is working by means of its high-cost stock construct. As traditional, free money circulate was detrimental for the quarter; nevertheless, the full debt issued (practically US$3.4 billion) was highest over the last 5 quarters. Nutrien’s leverage is rising.

Must you purchase the dip in Nutrien inventory?

An funding in Nutrien inventory as we speak may reward you with a quarterly dividend that yields 3.4% yearly. It would provide traders a rising stake in a well-established and worthwhile agricultural inputs enterprise that generates billions in free money circulate yearly. Capital positive aspects will flip constructive as soon as ongoing income declines stabilize in a normalized market.

Nutrien inventory value has fallen under January 2022 ranges after months of detrimental value momentum. The January 2022 interval is a key reference level. It lies earlier than the brake out of the Russia/Ukraine battle that triggered turmoil within the world fertilizers market, triggering a rally in North American fertilizer producers’ inventory costs. Shares commerce cheaper because the negativity of declining gross sales drags inventory values decrease. Nevertheless, the decline might be overdone.

After a large share-repurchase program, the corporate has 11% fewer shares excellent as we speak in comparison with January 2022. Administration splashed greater than $6 billion in cumulative share repurchases over the previous 5 quarters, as the corporate made document earnings and booked document money circulate final 12 months.

The corporate remains to be repurchasing shares, and the remaining shareholders have a rising stake in its future earnings and money circulate.

Shares look low-cost at a ahead price-to-earnings (P/E) a number of of 9 that lies far under NTR’s peak ahead P/E of 25 a mean of 14.4 for the reason that merger of Agrium and Potash Corp in 2018.

Nutrien is a long-term, buy-and-hold Canadian supplies inventory that ought to do effectively sooner or later as crop manufacturing ranges stay excessive and farming yields stay elevated in North America, and because it grows its world market share with acquisitions in Brazil.