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About the Industry
The Zacks Fertilizers industry comprises producers, distributors and marketers of crop nutrients for the global agriculture industry. Companies in this space offer nutrients such as phosphates (including diammonium phosphate, monoammonium phosphate and phosphoric acid), potash and nitrogen (including urea, ammonia and urea ammonium nitrate) fertilizers. They also provide other nitrogen products to help farmers maximize crop yield. Crop nutrients are essential to drive agricultural productivity and boost the natural fertility of the soil. Demand for these nutrients is being supported by the need to increase the production of grains to address rising food consumption globally. Moreover, the constant need of growers to nourish their crops, replenish nutrients in the soil following a harvest and boost yields to feed a growing global population drives the consumption of fertilizers.
What's Shaping the Future of the Fertilizers Industry?
Healthy Demand for Crop Nutrients: The companies in the fertilizers space are well-placed to benefit from healthy global demand for major crop nutrients. Fundamentals in the broader agriculture space remain positive, given the sustained rise in food demand globally. Farmer economics also remain attractive in most global growing regions due to strong crop demand. Favorable farmer economics, improved affordability and low inventory levels are expected to drive potash demand globally. The phosphate market is also supported by low producer and channel inventories. Demand for nitrogen fertilizer also remains healthy in major markets, driven by demand in North America, India and Brazil. Expectations of high levels of planted corn and soybean acres globally also suggest a pickup in fertilizer demand in 2026.
Higher Fertilizer Prices Augur Well: Prices of phosphate, potash and nitrogen remained depressed in 2023 and 2024 amid oversupply in the market and weak demand, weighing on the profitability of fertilizer companies. On a positive note, strong demand and supply tightness led to an uptick in fertilizer prices in 2025, with phosphate prices seeing a notable increase. Prices were driven by solid agricultural demand in major markets, China’s export restrictions, U.S. tariffs and higher costs of inputs. Higher fertilizer prices are expected to drive top-line and margin expansion for companies in this space over the near term.
Elevated Input Costs a Concern: Increased prices of major raw materials pose a headwind to fertilizer companies. Prices of both sulfur and ammonia — key inputs for the production of phosphate — remain elevated. Supply disruptions from Russia amid the war with Ukraine contributed to the rise in prices of both sulfur and ammonia. Plant shutdowns and maintenance also led to a tight supply of these raw materials, which, coupled with strong demand, pushed up their prices. Rising natural gas prices, a key feedstock for nitrogen fertilizer, are also a concern. Higher raw material costs have led to an increase in production costs. As such, fertilizer makers are likely to face short-term margin pressure associated with higher input costs.
Zacks Industry Rank Reflects Upbeat Prospects
The Zacks Fertilizers industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #42, which places it in the top 17% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bright near-term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms S&P 500
The Zacks Fertilizers industry has underperformed the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.
The industry has gained 7.5% over this period against the S&P 500’s rise of 14.9% and the broader sector’s increase of 39%.
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Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing fertilizer stocks, the industry is currently trading at 5.24X compared with the S&P 500’s 18.8X and the sector’s 16.51X.
In the past five years, the industry has traded as high as 18.05X and as low as 4.55X, with a median of 10.18X, as the chart below shows.
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3 Fertilizer Stocks to Keep a Close Eye on
Intrepid Potash: Colorado-based Intrepid Potash is the only producer of muriate of potash in the United States and makes a specialty fertilizer, Trio. It is gaining from a healthy demand environment, aided by healthy farmer economics and favorable crop prices. A recovery in economic activities is spurring demand for Trio. Higher demand for key products is expected to drive IPI’s volumes. Strong production is driving its potash volumes. The company also remains focused on executing its capital projects, which are expected to boost its production.
Intrepid Potash currently carries a Zacks Rank #2 (Buy). IPI has a projected earnings growth rate of 506.7% for 2025. The Zacks Consensus Estimate for 2025 earnings for IPI has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nutrien: Canada-based Nutrien is a leading provider of crop inputs and services. The company is benefiting from higher demand for crop nutrients, backed by supportive global agriculture markets. It is seeing strong demand in its major markets, particularly North America. NTR is also gaining from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to expand its footprint in Brazil through acquisitions. Cost and operational efficiency initiatives are also expected to aid the company’s performance. NTR remains focused on lowering the cost of production in the potash business. The company has announced several strategic actions to reduce its controllable costs and boost free cash flow.
Nutrien has expected earnings growth of 32.9% for 2025. The Zacks Consensus Estimate for 2025 earnings has been revised 1.5% upward over the past 60 days. Nutrien currently carries a Zacks Rank #3 (Hold).
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CF Industries: Illinois-based CF Industries is a leading global manufacturer of nitrogen and hydrogen products for fertilizer, clean energy, emissions reduction and other industrial applications. It is gaining from higher nitrogen fertilizer demand in the major markets such as North America, Brazil and India. CF is seeing higher nitrogen demand for industrial uses in North America. CF remains committed to boosting shareholders’ value by leveraging strong cash flows. The company is also taking action to de-leverage its balance sheet.
CF Industries, currently with a Zacks Rank #3, has an expected earnings growth rate of 32.8% for 2025. CF’s earnings beat the Zacks Consensus Estimate in each of the last four quarters at an average of 15%.
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This article originally published on Zacks Investment Research (zacks.com).
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