Nufarm's (ASX:NUF) pre-announcement of a fiscal first-half 2026 earnings before interest, taxes, depreciation, and amortization range of AU$236 million to AU$244 million was an "encouraging" update, pointing to positive momentum into April and the normal operations of supply chains, Jefferies said in a Wednesday note.

"While positive, leverage remains high (1H26e: 3.6x) for a business with volatile earnings, and we would like to see more evidence of stabilization in [crop protection] markets given pressured farmer profitability," the equity research firm said.

It added that Nufarm's Omega-3 break-even costs are still higher than fish oil equivalent pricing, indicating continued margin pressure for the company's growth platform, but full deregulation, potentially from 2028, could improve the cost profile.

Jefferies maintained a hold rating on the company, saying that it is advancing in the right direction but its shares are already priced for improvement. The equity research firm also raised its price target on the company's shares to AU$2.66 from AU$2.58 based on a sum-of-the-parts valuation.

"Overall, we see better opportunities in other industrial cyclical names with better returning businesses and less volatile earnings profiles," Jefferies said.

Nufarm's shares were up almost 2% in recent Thursday trade.