Nutrien (TSX:NTR) presents a mix of opportunities and challenges for investors heading into 2025. The broader market dynamics shaping Nutrien stock are worth considering. The agricultural sector remains sensitive to variables like crop prices, farmer spending, and geopolitical events. Lower crop prices have pressured fertilizer demand recently, but there is optimism that potash demand could improve in the medium term. These shifting market conditions will be pivotal in determining Nutrien's ability to rebound. So let's dig into this stock to see how it might look in 2025.

Recent performance

Its most recent earnings report highlighted ongoing struggles, with net earnings in the third quarter of 2024 falling to just $25 million or $0.04 per share – a sharp decline from the $82 million or $0.15 per share in the same period the previous year. Adjusted earnings per share (EPS) also came in below expectations, pointing to a company still grappling with market pressures and operational hurdles.

Looking at its past performance, Nutrien stock has had a volatile trajectory. In the second quarter of 2023, net earnings were significantly down at $448 million compared to $3.6 billion in the same quarter the year before. This drastic dip was largely driven by lower fertilizer prices and decreased sales volumes, particularly in offshore potash markets. While these numbers may appear discouraging, they also underscore the cyclical nature of Nutrien's industry, where peaks and troughs are heavily influenced by global commodity trends.

The future outlook for Nutrien offers cautious optimism. Analysts have pegged a 12-month average price target of $59, suggesting room for meaningful upside from its current price of around $46. EPS is expected to grow modestly in the coming years, reaching $3.59 in 2024 and $3.68 in 2025. This points to some stabilization, though the pace of recovery may not be rapid enough to excite growth-oriented investors.

Current strength

Dividend investors, however, may find Nutrien stock intriguing. The stock offers an annual forward dividend rate of $2.99, yielding a robust 4.6%. Yet, with a payout ratio exceeding 145%, there are valid concerns about the sustainability of this dividend unless earnings strengthen. For income-focused portfolios, this represents both a potential opportunity and a risk, as any cuts to the dividend could weigh on the stock price and investor sentiment.

Nutrien stock has also taken steps to improve its financial health and operational efficiency. The company has paused some ambitious projects, including its potash production ramp-up and the Geismar clean ammonia project, to focus on free cash flow and cost containment. These strategic adjustments are critical for navigating the current challenges. All while positioning the company for long-term resilience.

Investors should remain mindful of the risks associated with Nutrien. The agricultural sector is notoriously susceptible to external factors such as adverse weather conditions, fluctuating commodity prices, and regulatory changes. Nutrien stock's elevated payout ratio further underscores the need for caution, as its ability to maintain dividends relies heavily on improving earnings.

Bottom line

For now, Nutrien stock seems best categorized as a "Hold." The stock is reasonably priced, offers an attractive dividend yield, and has potential for moderate appreciation. However, the recent earnings struggles and uncertainties in the agricultural market warrant a careful approach. Investors should keep an eye on upcoming earnings reports and global demand trends to reassess their position.

All considered, Nutrien stock remains a compelling yet complex stock for 2025. While its valuation and dividend yield make it appealing for certain investors, the company's recent performance and industry headwinds suggest that patience and vigilance are necessary before making significant moves. For those already holding Nutrien stock, it may be worth riding out the current turbulence to see how the narrative unfolds.