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.
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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.
