UBS Ranks Fertilizer Stocks as Nitrogen Outlook Improves

Investing.com -- Investing.com -- UBS analysts have released their latest rankings for fertilizer stocks, highlighting a mixed outlook across the sector with nitrogen exposure viewed most favorably heading into 2027.

The investment bank ranks nitrogen above potash and phosphates for near-term performance, citing returning demand, ongoing Middle East supply disruptions, and elevated European natural gas costs providing cost curve support.

According to UBS, nitrogen fertilizer producers are positioned to benefit from a compressed demand timetable and continued supply challenges. The firm expects these factors to drive higher pricing into the spring peak demand season.

While increased Chinese exports and softer ammonia markets remain concerns, UBS views current pricing levels as unsustainably discounted relative to the cost curve. The analysts have raised their 2027 and 2028 estimates across coverage, with the largest increases driven by the improving nitrogen outlook.

1. CF Industries (Neutral rated) - UBS views CF Industries as the top beneficiary of improving nitrogen fundamentals as a pure-play nitrogen producer. The firm raised its 2027 and 2028 estimates for CF by 24% and 16% respectively, placing expectations 34% above and 1% below consensus.

UBS sees this lifting the stock's value to the mid-$130 range, though notes the stock has already moved to the low $120s. CF has traded between $100 and $140 per share multiple times this year, with UBS expecting continued volatility around Middle East reopening news.

2. Nutrien (Sell rated) - UBS ranks Nutrien second, noting the company will benefit from improved nitrogen fundamentals to a lesser degree given its mixed portfolio exposure across potash, nitrogen, and retail operations.

Potash pricing held better than expected during the seasonally weak third quarter, pointing to a higher exit rate into the fourth quarter. UBS raised its 2027 and 2028 EBITDA outlook for Nutrien by 10% and 3%, now 3% above and 4% below consensus. However, the firm continues to see oversupply risks for potash from mid-2027 onward as approximately 15 million metric tons of new supply comes online through 2030.

3. The Mosaic Company (Neutral rated) - UBS places Mosaic third, noting the company faces the most challenging outlook due to phosphate market disruptions. While UBS reflected modest improvement in the potash outlook into the first half of 2027, phosphate markets remain pressured by Middle East disruptions to sulfur supply. Global phosphate operating rates are severely curtailed with estimates that approximately 50% of global production is offline.

Mosaic stock has fallen from $26 to around $18 per share recently. UBS raised its 2027 and 2028 estimates by 9% and 5% but remains 21% and 1% below consensus, assuming normalization in phosphate markets beginning in the second quarter of 2027.

Original Article

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