The Russia-Ukraine war has exacerbated supply chain disruptions, causing food prices to skyrocket of late. This is because Ukraine is a major exporter of wheat, corn, and vegetable oils, while Russia is a major producer and exporter of wheat and fertilizers. The world’s food costs jumped to new records in March, with the surging prices adding to inflationary pressures. The FAO Food Price Index hit 159.3 in March, registering a 13% increase from February.
Yesterday, corn prices jumped to a new record. The contracts for July corn futures were trading above $8 per bushel, their highest level in nine years. The strong demand for U.S. grain and constrained supplies amid the war have contributed to the surge in corn prices. Investors’ interest in this sector is evident from Teucrium Corn Fund’s (CORN) 60.7% gains over the past year.
Archer-Daniels-Midland Company (ADM)
ADM in Chicago stores, transports, merchandises, and sells agricultural commodities, products, and ingredients in the U.S., Switzerland, Brazil, Mexico, the United Kingdom, and internationally. The company operates through three segments: Ag Services and Seeds; Carbohydrate Solutions; and Nutrition. In addition, ADM engages in the import, export, and distribution of agricultural commodities and feed products and in trade finance.
This month, ADM announced its $300 million investment to expand its Decatur, Ill., alternative protein production because the company plans to add capacity to meet the strong demand. ADM will also open a new, state-of-the-art Protein Innovation Center in Decatur to further its alternative protein capabilities. These initiatives are expected to boost its sales and expand its leadership position with new capacity and innovation.
In January, ADM’s board of directors declared a cash dividend of 40 cents per share, registering an 8.1% increase from the last quarter’s dividend. This reflects ADM’s strong cash flows, allowing the company to deliver growth investments and distributions to the shareholders.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, ADM’s revenues increased 28.4% year-over-year to $23.09 billion. Its gross profit improved 22% from the prior-year period to $1.65 billion. Its net earnings attributable to ADM and earnings per common share came in at $782 million and $1.38, respectively, registering an increase of 13.8% and 13.1% from the prior-year period.
The $24.14 billion consensus revenue estimate for its fiscal year 2022 second quarter, ending June 30, 2022, represents 5.3% growth from the same period in 2021. The $1.37 consensus EPS estimate for the current quarter indicates a 3.4% year-over-year rise. It is no surprise that ADM has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 42.1% in price year-to-date and 62.8% over the past year and closed yesterday’s trading session at $96.46.
ADM’s POWR Ratings reflect this promising outlook. It has an overall A grade, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ADM has an A grade for Growth and B for Value and Sentiment. Within the Agriculture industry, it is ranked #2 of 33 stocks.
To see additional POWR Ratings (Stability, Quality, and Momentum) for ADM, click here.
Bunge Limited (BG)
BG is a leading agribusiness and food company. The White Plains, N.Y., concern operates through four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy. BG stores, transports, processes, and sells agricultural commodities and commodity products. It also sells packaged and bulk oils, die-cut pellets, corn milling products, and non-GMO products.
On March 19, BG announced the conversion of all issued and outstanding shares of its 4.9% cumulative convertible perpetual preference shares into the company’s common shares at a par value of $0.01 per share. This reflects the company’s strong share price performance in the past months. This development might simplify and strengthen BG’s capital structure.
This February, BG’s Board of Directors declared a cash dividend of $0.53 per share. The dividend is payable on June 2, 2022. The declaration of dividends reflects the company’s ability to pay back to the shareholders.
BG’s net sales increased 30.4% year-over-year to $12.32 billion. Its gross profit grew 5.5% year-over-year to $616 million in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. BG’s adjusted total segment EBIT improved 16.6% from the prior-year period to $680 million. The company’s adjusted net income per common share rose 14.4% year-over-year to $3.49.
Analysts expect BG’s revenue for its fiscal year 2022 second quarter, ending June 30, 2022, to come in at $16.44 million, representing a 6.8% rise year-over-year. The Street expects the company’s EPS for the current quarter to come in at $2.74, representing a 5.1% increase year-over-year. The company has an impressive earnings surprise history; it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of BG have increased 35.3% in price year-to-date and 48% over the past six months. It closed yesterday’s trading session at $126.76.
BG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
BG has a grade of B for Growth and Sentiment. Within the Agriculture industry, it is ranked #8 of 33 stocks.
To see additional POWR Ratings (Momentum, Value, Quality, and Stability) for BG, click here.
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ADM shares were trading at $94.09 per share on Tuesday morning, down $2.37 (-2.46%). Year-to-date, ADM has gained 39.95%, versus a -6.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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