What happened

Shares of Nutrien (NTR -0.79%) took a dive today after the fertilizer company posted weak results on the top and bottom lines and got hit by a slowdown in potash demand.

The stock finished the day down 14.1% on the report.

So what

Overall results were strong as the company continued to benefit from higher overall fertilizer prices, but the potash issues weighed on the stock.

Revenue in the quarter rose 36% to $8.19 billion, but that was well below expectations of $8.7 billion. A reduction in potash purchasing in North America and Brazil led to the weaker-than-expected results as high prices and higher inventory levels from a weather-shortened spring planting season seemed to impact demand for the crop nutrient.

Adjusted earnings per share nearly doubled from $1.38 to $2.51, but that also missed estimates of $3.97.

Despite the challenges in the potash segment, CEO Ken Seitz was optimistic about the market heading into 2023, saying, "The underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond."

Now what

Management lowered its guidance for the year, primarily due to lower potash demand. It now forecasts potash-adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $5.8 billion to $6.2 billion, down from a prior range of $7.6 billion to $8.2 billion. Since potash makes up nearly half of the company's EBITDA, that led it to reduce adjusted EPS guidance from $15.80-$17.80 to $13.25-$14.50. 

Based on that forecast, Nutrien stock trades at price-to-earnings ratio of just 5, a sign the company is significantly benefiting from higher fertilizer prices. It's used the windfall to buy back shares, reducing shares outstanding by about 5% over the last year.

If fertilizer prices remain elevated and the potash headwinds normalize, the agriculture stock looks like a good bet to continue to outperform.