LSB Industries (LXU) is seen benefiting from high nitrogen prices due to the supply disruption caused by the Middle East conflict, boosting free cash flow generation before prices normalize, RBC Capital Markets said in a note emailed Monday.
Nitrogen prices are expected to remain high even after the Strait of Hormuz reopens, as it will take time for fertilizer markets to normalize as tight natural gas prices persist in Europe and globally through 2027, RBC analysts said. They added that they expect nitrogen price to peak mid-year, but there is a upside risk if the US and Iran continue to fail to reach a settlement agreement.
LSB executed strongly in Q1 with production volumes better than expected and non-gas controllable costs 10% below RBC estimates, the firm noted. This suggests potentially even lower costs once the company is on a more regular turnaround schedule, according to the note.
RBC revised its estimates for LSB's earnings before interest, taxes, depreciation, and amortization to $238 million from $219 million in 2026, and to $188 million from $204 million in 2027.
RBC reiterated the company's stock rating at sector perform and raised the price target to $15 from $14.
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