Nufarm (ASX:NUF) share price rises ahead of next month's profit results

The Nufarm Ltd (ASX: NUF) share price is bucking the broader market weakness as expectations build ahead of its profit results in May.

| More on:
A farmer in a field of crops with arms in the air rejoices as he welcomes rain.

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Nufarm Ltd (ASX: NUF) share price is bucking the broader market weakness as expectations build ahead of its profit results in May.

The Nufarm share price jumped 1.4% during lunch time trade to $5.21 while the S&P/ASX 200 Index (Index:^AXJO) fell 0.8%.

The market is likely anticipating a pleasing first half result when the agribusiness hands in its report card on 20 May.

What the Nufarm share price is worth

Morgans is beating the drum for the company as the broker lifted its price-target on the Nufarm share price to $6.15 from $5.10 a share.

"We expect a strong result lead by its ANZ and European businesses which have benefited from much improved operating conditions," said Morgans.

"NUF is also benefitting from its Performance Improvement Program (PIP) which is lowering its cost base."

High expectations for Nufarm's profit results

What's also lifting expectations was management's recent update. While it didn't provide guidance, it reported that sales were up 17% in the first four months when compared to the same time last year.

High soft commodity prices are certainly helping and Nufarm added that the positive momentum was continuing into February.

"We forecast a strong 1H21 result with operating EBITDA up 73% to A$185.3m, albeit the company is cycling a weak comp," added Morgans.

"Improved trading reflects a return to more normal seasonal conditions which has seen increased demand for NUF's products across all of its regions."

Positive outlook for agriculture

Nufarm isn't the only ASX agriculture shares that's enjoying tailwinds. The Graincorp Ltd (ASX: GNC) share price and Elders Ltd (ASX: ELD) share price have also attracted investors.

The other good news for Nufarm is that profit margins should be expanding thanks to the PIP program.

Then there are also high hopes for its new omega-3 enriched canola seed offering. But low salmon prices due to the impact of COVID-19 could have a negative impact on demand.

Operating leverage drives buy recommendation

"Reflecting the company's operating leverage and with a higher AUD likely to reduce both USD D&A and interest expense on translation, the upgrades at the NPAT level are much more material," said Morgans.

"We forecast strong earnings growth over FY21-23 driven by improved seasonal conditions in Australia and Europe, PIP benefits, reduced supply constraints and cost pressures, recovery in T&O sales as COVID restrictions ease and a contribution from Omega-3 canola oil and carinata as they scale."

Morgans has an "add" recommendation on Nufarm.

Let's hope the Nufarm share price can carry the weight of high expectations.

Motley Fool contributor Brendon Lau owns shares of Elders Limited and Nufarm Limited. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cheap Shares

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Cheap Shares

Down 40%! Should you buy this beaten down ASX 200 stock?

One leading broker has given its verdict on this sold-off stock.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Cheap Shares

Where to invest $10,000 in a bullish share market?

High share prices shouldn't dissuade you from investing in the markets.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Cheap Shares

This ASX 300 stock is trading with the widest discount in its history

Bell Potter thinks this stock could be dirt cheap.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Cheap Shares

Here are my top 3 undervalued ASX shares to buy right now

These stocks are excellent picks in my opinion.

Read more »

Three cute kids with mixed expressions poke their heads out from the back of a kombi.
Cheap Shares

Three ASX shares down 10% to 23%! Are they cheap?

Price doesn't equal value.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

History says these 3 ASX shares are dirt cheap today

These beaten-down ASX shares could be offering great value for money.

Read more »

Woman looking at her smartphone and analysing share price.
Cheap Shares

Why this ASX All Ords stock is 'extremely undervalued' right now

This expert is calling the market's cheapest stock.

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Cheap Shares

After jumping 11% in a month, is this ASX bargain stock a buy?

This stock is on analyst radars after its FY24 results.

Read more »