Rising Global Population Will Fuel Digital Agriculture And Sustainable Yields

Key Takeaways

• Rapid cost savings, efficiency gains, and strategic M&A are driving sustained margin expansion and accelerated free cash flow growth, outpacing current market expectations.
  
• Unique innovation in digital agriculture and proprietary products, plus a dominant North American position, enhances pricing power and positions Nutrien as an indispensable partner for growers.
  
• Shifting agricultural trends, increased competition, regulatory pressures, and higher costs threaten Nutrien's growth prospects, pricing power, and shareholder returns over the long term.

Catalysts

Provides crop inputs and services.

• Analyst consensus sees ongoing automation and cost savings as incrementally margin-enhancing, but this likely understates the full upside; Nutrien's accelerating pace of efficiency gains and restructuring in both upstream and retail-demonstrated by exceeding its $200 million savings target a year early and clear confidence in capturing more beyond this-suggests meaningful and sustained net margin expansion that could far surpass current estimates, directly increasing earnings and free cash flow into 2026 and beyond.
  
• While analyst consensus reflects bullish potash/nitrogen volume and price growth, recent market data and management commentary point to global fertilizer demand outstripping supply and logistics capacity; with Nutrien already selling out inventories through multiple quarters and holding unmatched surge capacity, the company could capture a disproportionately large share of upside from continued supply-driven price firmness and robust demand, potentially driving revenue and EBITDA growth beyond present forecasts.
  
• Nutrien's deep investments in proprietary products, biologicals, and digital agriculture platforms-rapidly expanding gross margins and driving innovation in seed, crop nutrition, and yield optimization-uniquely position it to become the leading "one-stop partner" for large-scale global growers, setting the stage for a significant uplift in customer retention, higher-margin recurring revenue, and long-term EPS growth, especially as food demand and sustainable productivity solutions escalate.
  
• The company's dominant presence in North America, combined with recent global trade disruptions and heightened regulatory attention on food security, positions Nutrien to benefit disproportionately from regionalization and government support for supply chain resilience and domestic fertilizer production-creating tangible pricing power, structural volume gains, and long-term improvement in both top-line growth and margin stability.
  
• Accelerated M&A activity, continued divestiture of non-core assets, and a disciplined capital allocation strategy-evidenced by rapid redeployment into high-return bolt-on retail acquisitions and sustained share repurchases-are set to amplify free cash flow per share materially, hastening a capital return cycle likely stronger than embedded in current analyst forecasts.

Nutrien Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Nutrien compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Nutrien's revenue will grow by 6.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.1% today to 8.8% in 3 years time.
• The bullish analysts expect earnings to reach $2.6 billion (and earnings per share of $5.95) by about July 2028, up from $527.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, down from 56.4x today. This future PE is greater than the current PE for the US Chemicals industry at 10.5x.
• Analysts expect the number of shares outstanding to decline by 1.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.29%, as per the Simply Wall St company report.

Nutrien Future Earnings Per Share Growth

Risks

• Long-term regulatory and societal shifts toward sustainable and organic agriculture may reduce long-term fertilizer demand, which would limit Nutrien's core addressable markets and potentially mute revenue growth over time.
  
• Persistent global potash overcapacity, particularly from low-cost competitors such as Russia and Belarus, could lead to protracted periods of price discounting, putting sustained pressure on Nutrien's realized pricing and net margins.
  
• Heightened competition from agri-tech innovations-including precision agriculture, microbial fertilizers, and controlled-release nutrients-may displace traditional fertilizer usage, thereby reducing Nutrien's core product volumes and impacting future revenues and earnings.
  
• Increasing ESG scrutiny and a growing investor preference for green assets could drive up Nutrien's cost of capital and exert downward pressure on its valuation multiples, which would weigh on overall shareholder returns.
  
• Elevated capital expenditures required to maintain and upgrade legacy assets may erode free cash flow, especially if fertilizer prices remain volatile or depressed, constraining Nutrien's ability to fund growth initiatives or return capital to shareholders.

Valuation

• The assumed bullish price target for Nutrien is CA$96.61, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Nutrien's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$96.61, and the most bearish reporting a price target of just CA$57.58.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $29.5 billion, earnings will come to $2.6 billion, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of CA$83.49, the bullish analyst price target of CA$96.61 is 13.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.