12:42 PM EDT, 10/10/2024 (MT Newswires) -- Nutrien ( NTR ) is facing downside to 3Q earnings and lesser upside on longer term estimates amid a weaker agriculture market, lower fertilizer prices, and the slower-than-expected recovery of its retail business, UBS Securities said in a Thursday note.

Apart from fertilizer prices and the company's retail earnings, higher capital expenditures and capital lease payments continue to weigh on free cash flow, according to UBS. This drag on free cash flow generation is hampering holding back Nutrien ( NTR ) stock's potential to re-rate, the investment firm added.

And while the potash market supply and demand seem "relatively balanced" in the medium term, UBS said additional supply from BHP Group ( BHP ) in 2027 onwards could pressure prices. UBS also noted that affordable potash prices are unlikely to present upside risk to demand given the challenged profitability of farms.

"In our view, we would need to see upside to current fertilizer prices and reductions in capital expenditures to make the shares more attractive," said UBS.

UBS downgraded Nutrien ( NTR ) to neutral from buy, with a lower price target of $51 from $66.

Price: 48.65, Change: -0.38, Percent Change: -0.78