Nutrien Ltd, formed in 2018 through the merger of PotashCorp and Agrium, operates as the world's largest provider of crop inputs and services. The company's integrated business model spans potash, nitrogen, and phosphate production, complemented by a global retail network serving approximately 500,000 farmer accounts worldwide. Its valuation fundamentally depends on agricultural commodities cycles, global food demand, and its ability to maintain operational efficiency across its diverse asset base.

Our DCF valuation indicates a probability-weighted intrinsic value of $66.00 per share, derived from a thorough analysis of three scenarios that capture the range of potential outcomes for Nutrien's business. The base case ($65.15 per share, 40% probability) assumes a conservative 2.3% growth rate and projected free cash flow of $2.5 billion, reflecting analyst consensus and management guidance for near-term capital expenditure of $2.2-2.3 billion in 2024. The bull case ($81.65 per share, 30% probability) incorporates a more optimistic 3.33% growth rate and $3.0 billion in free cash flow, accounting for potential market share gains and operational efficiencies. The bear case ($51.46 per share, 30% probability) factors in a modest 2% growth rate and $2.0 billion in free cash flow, considering potential market pressures and commodity price volatility.

The valuation employs a 10% discount rate across all scenarios, reflecting the cyclical nature of the fertilizer industry and current market risks. This rate incorporates the risk-free rate of 4.61% (10-year U.S. Treasury yield), a market risk premium of 5.5%, and Nutrien's industry beta of 0.85. The terminal growth rate is set at 2%, aligned with long-term global GDP growth expectations and the mature nature of the fertilizer industry.

This analysis deliberately moves away from historical free cash flow figures, which showed significant volatility (ranging from $2.7 billion to $4.4 billion in recent years), instead focusing on projected cash flows that better reflect the company's steady-state operations. The forward-looking approach better captures Nutrien's strategic initiatives, including its retail network expansion and operational efficiency programs, while accounting for the cyclical nature of commodity prices.

Key value drivers incorporated in the analysis include Nutrien's global market leadership in fertilizer production, its extensive retail network providing stable cash flows, and ongoing operational efficiency initiatives. The company's strategic decision to pause its potash ramp-up and suspend work on the Geismar clean ammonia project in 2023 demonstrates management's commitment to maintaining free cash flow in challenging market conditions. These actions support our base case assumptions of sustainable free cash flow generation.

The valuation reflects both opportunities and challenges facing Nutrien. Growth potential stems from increasing global food demand, adoption of precision agriculture technologies, and potential market consolidation. However, risks include commodity price volatility, geopolitical tensions affecting trade flows, and increasing environmental regulations. The probability distribution (40/30/30) acknowledges these balanced but uncertain prospects, while the consistent 10% discount rate across scenarios provides a conservative framework for assessing Nutrien's long-term value creation potential.

A crucial reality check on this valuation comes from examining Nutrien's competitive position and market dynamics. The company's integrated business model provides resilience through industry cycles, supporting our base case assumptions. However, the fertilizer industry's historical cyclicality and ongoing consolidation suggest caution in growth expectations, reflected in our conservative terminal growth rate and scenario probabilities. The real story unfolding is one of a market leader navigating the balance between growth investments and cash flow generation in a mature, cyclical industry essential to global food security.

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