Agricultural Stock Ideas For Spring - Canadians Can Opt For Canadian Tire, Nutrien

Spring is here and Canadians are getting their gardens ready. At my house, our daughter has a fan blowing on her indoor plants, which she says she will move outdoors on the Victoria Day weekend once the overnight temperature is consistently above 10 degrees Celsius. The plants, she says, will grow tall and are used for making a substance used in rope and industrial textiles. She’s only allowed to grow four of them, she said. Hmm.

Spring means buying seeds, plants, fertilizer and garden equipment. Patriotic Canadian shoppers may prefer to get their supplies at Canadian Tire or Home Hardware over Home Depot, Wal-Mart or Amazon, and while Rona was once a Canadian name, it’s now owned by a U.S. hedge fund.

For investors, Canadian Tire and Nutrien offer long histories of dividend increases, generous yields and share buybacks that reflect management’s focus on their shareholders. Scotts Miracle-Gro, a U.S. consumer gardening products company, appears undervalued but will have to improve its fundamentals to outperform the market. The shares of outdoor equipment maker Deere & Co. should have appeal for momentum investors.

Canadian Tire (CTC.A)

Along with its trademark 500 Canadian Tire stores and gas stations, CTC owns SportChek, Mark’s, Party City and Pro Hockey Life in a network that totals about 1,700 retail locations. Canadians angered by U.S. government policies may opt for Canadian Tire over the big U.S. chains, but that doesn’t mean everything on Canadian Tire’s shelves is made in Canada, as much of its inventory is still produced in China.

The company is moving to diversify away from China, president and CEO Greg Hicks told analysts in a third-quarter conference call last autumn 2024. Canadian Tire gets about 15% of its inventory from the United States, but the company may be able to find Canadian sources for 25% to 30% of its products. The biggest concern about any trade war with the United States is its effect on consumer confidence, Mr. Hicks said.

In February 2025, Canadian Tire reported strong revenue and earnings for 2024, as the company reported full-year, normalized diluted earnings of $787.7 million or $12.62 per share, up 21.7% from 2023. In the fourth quarter of 2024, Canadian Tire reported net income of $411.5 million or $4.07 per diluted share on total revenue of $4.5 billion, but that included $197.4 million in net gains from the sale of its Brampton, ON distribution centre. Without that sale, the company’s normalized earnings for the quarter were $247.5 million, up from $188.4 million in the same quarter of 2023.

Investors and analysts welcomed the results, sending the company’s non-voting shares up about 8% after the announcement. Canadian Tire’s non-voting shares had fallen 17% in three weeks from a peak of almost $170 in late January to $140 on 18 February 2025, before the announcement of 2024 results lifted investor confidence. Over the last few years, buying at levels below $150 has often provided a margin of safety. For $150, Canadian Tire’s non-voting shares trade at about 16 times forward estimated earnings per share.

In November 2024, Canadian Tire announced it would increase its dividend to $7.10 per share from $7 in 2025, its 15th consecutive year of dividend increases. At $150, the dividend yields a generous 4.7%.

In February 2025, the company announced it would sell its Helly Hansen outdoor clothing business for about $1.276 billion, using $200 million of the proceeds to reduce debt.

In March 2025, the company announced it will spend $2 billion over the next four years on True North, a new plan to restructure its operations to improve its sales and earnings. The company will build new stores, renovate others, close underperforming outlets and improve its internal computer systems to cut costs. As well, Canadian Tire doubled its planned 2025 share repurchase plan to $400 million from $200 million.

The TipRanks site, which aggregates analyst opinions, shows Canadian Tire listed as a moderate buy among 10 analysts who follow the stock. Their median 12-month target price is $164.17, in a range from a high of $196.51 to a low of $136.05.

Nutrien Ltd. (NTR)

Saskatoon, SK. based Nutrien, formed as the result of the 2018 merger of Potash Corp. and Agrium Inc., has a 20% market share of the global potash industry and is a leading producer of nitrogen fertilizer. Nutrien also has more than 1,900 Ag Solutions retail locations in seven countries including in North and South America and Australia, which together account for more than half its revenue, providing some protection from commodity price fluctuations. The protection from cyclical pricing can be extended to farmers, as some of Nutrien’s financing services allow farmers to purchase inputs and pay with grains.

As the world’s population grows, demand for fertilizer will grow with it and countries such as China and India will need more agricultural inputs. Nutrien should be a major beneficiary as it sits atop some of the world’s cheapest sources of potash in Saskatchewan, and has access to similarly plentiful and inexpensive sources of natural gas, used in nitrogen fertilizer.

In 2024, Nutrien generated net earnings of US$700 million or US$1.36 per share on revenue of US$26 billion. The figures were down from 2023 results, thanks to lower net selling prices for potash and nitrogen, but were partially offset by increased retail earnings and record potash sales volumes. Net earnings were also hurt by a loss on foreign currency derivatives in the second quarter of 2024, the company said.

A long-term chart of Nutrien’s share price shows the stock spiked at a peak of about $140 in April 2022 and then began a long three-year slide. A range of $70 to $75 appears more conservative, but there is always risk in buying any individual company. At a recent price of $68, Nutrien’s quarterly dividend payout yields about 4.6% but the company’s high payout ratio shows the dividend often exceeds net earnings. This may eventually be a risk for the dividend, which has increased 36% since 2021. Like Canadian Tire, Nutrien has been consistently repurchasing its shares. In the company’s annual report, Nutrien said it had repurchased 3.9 million of its shares for US$190 million in the second half of 2024, and another 1.9 million for US$96 million by mid-February of 2025.

The TipRanks site shows Nutrien is regarded as a moderate buy among 17 U.S. analysts who follow the NYSE-listed stock. Their median 12-month target price is US$58.60 (CAD$83.83), with a high of US$68 ($97) and a low of US$50 ($71.53).

Regardless of their retail shopping patterns, Canadian investors who shun U.S. equities in favour of Canadian stocks will find they have limited their returns, while doing nothing to affect the fortunes of companies on either side of the border.

The Scotts Miracle-Gro Co. (SMG/NYSE)

One possible choice for investors who like to wager on turnarounds is the largest supplier of lawn and gardening products in the United States, Marysville, Ohio-based Scotts Miracle-Gro.

Scott’s consumer segment makes and sells grass seed, fertilizer, weed and pest control products, while its Hawthorne unit caters to the cannabis industry, which has not been growing as much as investors hoped. The company’s products are prominently displayed in stores such as Home Depot, Lowe’s and Wal-Mart. As with most consumer agricultural companies, Scotts benefits from gains in new housing starts.

SMG shares peaked at more than US$93 in November 2024, then suffered a few sharp selloffs to a recent price of near US$50. The plunges show SMG as undervalued by many metrics, however, the stock is suitable only for the most risk-tolerant of deep-value investors who are prepared to wager on a turnaround.

In late January 2025, Scotts reported a net loss of US$69.5 million or US$1.21 per share on sales of US$416.8 million in the first quarter of its fiscal 2025 year, an improvement over the loss of $80.5 million or $1.42 per share that it sustained in the first quarter of 2024.

The losses mean there is no current price/earnings ratio. However, the shares trade at less than one times sales per share. Six analysts who follow SMG regard it as a strong buy, with an average price target of US$72.67 amid a range of between US$69 and US$80.

John Deere & Co. (DE/NYSE)

Founded in 1912, Moline, Illinois-based Deere & Co. is well known for its agricultural, construction and forestry equipment. Most of its sales are made through its 2,000 dealers in North America, but 17% of its sales are made in Europe, 14% in Latin America and 9% in the rest of the world.

In January 2025, the company unveiled new autonomous machines that will use artificial intelligence, advanced computer vision and cameras to work without a human operator. The company’s 60-inch autonomous battery electric mower for commercial landscaping, available next year, uses GPS mapping, sensor-based navigation for GPS-denied areas and obstacle detection. The mower will be able to cut grass by itself, freeing up human landscaping crews to handle more pruning and trimming.

After years of range-bound trading, Deere shares began climbing last summer and may have appeal for momentum investors. The 14 U.S. analysts who follow Deere have an average one-year price target of US$487 with a high of US$542 and a low of $440.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. richarddmorrison@yahoo.ca