Despite the positive economic signals, uncertainty remains high as inflationary pressures persist and interest rates rise. In the agriculture and farm sector, crop and livestock prices are still strong. Therefore, it might be wise to add fundamentally strong agriculture stocks Archer-Daniels-Midland Company (ADM), Bunge Limited (BG), ICL Group Ltd (ICL), and Dole plc (DOLE) now to help grow your portfolio in 2023. Let’s look closer at the industry’s upside potential amid continued uncertainty.
The agriculture industry faced numerous challenges in the previous year, including shocks associated with the war in Ukraine, high rates of inflation, and lingering supply chain problems. The immediate effect on global food markets was a halt in supplies from one of the world’s top agricultural producers and exporters.
Farmers also faced a sharp increase in input costs relative to previous years, especially fertilizer, producing some anxiety about potential margins despite crop prices that remained strong. In order to address the rising costs and spur competition, the U.S. Department of Agriculture (USDA) announced $29 million in grant offers to increase American-Made Fertilizer Production.
Such incentives should assist small, independent firms to expand their production of fertilizers, which would enhance competition, provide American farmers with more options and more equitable prices, and lessen their reliance on shaky foreign suppliers like Russia and Belarus.
In addition, the American agricultural sector posted its best export year ever in 2022, with international sales of U.S. farm and food products reaching $196 billion, demonstrating the success of the Biden-Harris Administration’s efforts in creating new markets for U.S. agricultural producers and businesses.
Furthermore, the adoption of advanced technology in agriculture and a growing population should boost the demand for agricultural produce and the long-term growth of the sector. The global agriculture market is expected to reach $19.01 trillion in 2027, growing at a CAGR of 9.1%.
Amid this backdrop, it could be wise to invest in quality agriculture stocks ADM, BG, ICL, and DOLE this year. Given their strong fundamentals and the industry’s defensive nature, these stocks could help grow your portfolio in the long run.
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company operates through three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.
On March 13, ADM was named to the World’s Most Ethical Companies List for the fourth year in a row by Ethisphere, a global leader in advancing the standards of ethical business practices. Additionally, in February, ADM was recognized as the world’s most admired company in the food production industry by FORTUNE Magazine for the 15th consecutive year.
This reflects the company’s exceptional performance and constant commitment amid a challenging global environment.
On February 6, ADM announced the opening of a new production facility in Valencia, Spain, to address the increasing global demand for probiotics, postbiotics, and other goods that promote health and well-being. With an investment worth $30 million and a more than five-fold increase in ADM’s production capacity, this facility should enable the company to meet the rising demand for probiotics and postbiotics throughout the U.S., Pacific Rim, and Europe.
As more people become aware of the connections between the gut microbiome and numerous aspects of health and look for products suited to their individual needs, ADM anticipates its customer base will more than triple over the following five years.
In the fiscal fourth quarter that ended December 31, 2022, ADM’s revenues increased 13.6% year-over-year to $26.23 billion. Its gross profit rose 6.8% from the year-ago value to $1.76 billion. The company’s EBIT grew 20% from the prior-year quarter to $1.2 billion, while its adjusted net earnings came in at $1.07 billion, representing a 25.8% increase year-over-year. ADM’s adjusted EPS stood at $1.93, up 28.7% from its year-ago period.
Analysts expect ADM’s revenue to increase 2.3% year-over-year to $24.20 billion for the fiscal first quarter (ending March 31, 2023). The company has a commendable earnings surprise history, surpassing the consensus EPS and revenue estimates in each of the four trailing quarters.
ADM’s net income and EBITDA have increased at CAGRs of 46.6% and 26.9%, respectively, over the past three years, while its EPS has grown at a 46.7% CAGR.
The stock gained 2.3% intraday to close the last trading session at $78.95.
ADM’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ADM also has a B grade in Growth and Sentiment. It is ranked #5 out of 25 stocks in the Agriculture industry. To see the additional POWR Ratings for Value, Stability, Quality, and Momentum for ADM, click here.
Bunge Limited (BG)
BG is an agribusiness and food company that operates internationally. It provides agricultural commodity products, packaged and bulk oils and fats, sugar and ethanol, and corn milling products. The company operates through four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy.
On March 14, BG, Corteva Inc. (CTVA), and Chevron U.S.A. Inc., a subsidiary of Chevron Corporation (CVX), announced a commercial collaboration to introduce proprietary winter canola hybrids that produce plant-based oil with a lower carbon profile. With a goal to increase the availability of vegetable oil feedstocks primarily for the growing domestic renewable fuels market, this should benefit the companies with substantial revenues.
In the same month, BG and CTVA announced a significant advancement in their multi-year collaboration to develop enhanced-amino acid soybeans that deliver potential value to farmers and feed and animal protein producers.
Globally, sales of synthetic methionine and lysine for feed applications exceed $10 billion annually, and the market is expected to grow with underlying animal protein demand. As a result, the commercialization of these soybeans could add to the company’s topline growth.
On February 23, the company declared a quarterly dividend of $0.63 per share, payable to its shareholders on June 2, 2023. Its forward annual dividend of $2.50 translates to a 2.39% yield on current prices. BG’s four-year average dividend yield is 3.11%. Also, its dividends have grown at 6.3% and 5.9% CAGRs over the past three and five years, respectively.
For the fiscal fourth quarter that ended on December 31, 2022, BG’s gross profit increased 18.7% year-over-year to $818 million. Its adjusted total segment EBIT grew 8.8% year-over-year to $740 million, while its net income came in at $336 million, up 45.5% year-over-year. Also, its net income per common share increased 45.4% year-over-year to $2.21.
Its revenue and EBITDA have increased at CAGRs of 17.8% and 27.9% over the past three years. Also, its EBIT has increased at a 42.9% CAGR over the same period.
Street expects BG’s EPS to increase by 2.5% year-over-year to $3.04 for the fiscal second quarter (ending June 2023). It surpassed the EPS estimates in three of the trailing four quarters. The stock has gained 13.5% over the past six months to close the last trading session at $104.62.
BG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It also has a B grade for Growth and Value. In the same industry, it is ranked #7 of 25 stocks. Click here to see the other ratings of BG for Momentum, Quality, Sentiment, and Stability.
ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL and its subsidiaries are engaged in the fertilizer and specialty chemical sectors. The company operates in three segments: Fertilizers; Industrial Products; and Performance Products. It executes its sale through marketing companies, agents, and distributors.
On January 19, ICL announced that its AgriFood innovation and investment platform, ICL Planet Startup Hub, has invested €2.75 million ($2.95 million) in Arkeon, GmbH, to develop CO2-derived protein ingredients for food applications.
“Arkeon brings to the table innovative and sustainable technology for use in creating the next generation of alternative protein products. They also fully align with ICL Food Specialties growth strategy of pursuing new frontiers in unique and functional alternative proteins,” said Rado Sporka, vice president of the Food Specialties Commercial Business for ICL.
In the same month, the company signed a strategic partnership agreement with General Mills to supply phosphate solutions in North America with the potential for international expansion. Such collaborations should help expand the company’s footprint, boosting its revenue and overall growth prospects.
ICL’s sales increased 2.6% year-over-year to $2.09 billion in the fourth quarter that ended December 31, 2022. Its adjusted operating income grew 22.7% from the year-ago value to $562 million, while its adjusted net income increased 5.6% year-over-year to $358 million. The company’s adjusted EBITDA came in at $698 million, up 18.9% year-over-year. Also, its EPS increased 7.7% from its year-ago value to $0.28.
Analysts expect its EPS to increase by 3.9% per annum over the next five years. Its revenue grew at CAGRs of 23.9% and 13.1% over the past three years and five years. Likewise, its EPS grew at a CAGR of 65.3% over the past three years.
The stock gained 3.2% intraday to close the last trading session at $7.04.
It is no surprise that ICL has an overall rating of B, equating to Buy in our proprietary rating system. It has an A grade for Value and a B for Quality. Within the same Agriculture industry, it is ranked #4.
In addition to the POWR Ratings stated above, we have also given ICL grades for Growth, Momentum, Stability, and Sentiment. Get all ICL ratings here.
Dole plc (DOLE)
DOLE, headquartered in Dublin, Ireland, engages in sourcing, processing, marketing, and distributing fresh fruit and vegetables. The company operates through four segments: Fresh Fruit; Diversified Fresh Produce – EMEA; Diversified Fresh Produce – Americas and ROW; and Fresh Vegetables.
On March 6, DOLE declared a cash dividend for the fourth quarter of 2022 of $0.08 per share, payable on April 21, 2023. Its forward annual dividend translates to a 2.7% yield on current prices, while its four-year average dividend yield is 1.72%.
On January 31, the company announced the sale of its Fresh Vegetables Division to an affiliate of Fresh Express Incorporated, a wholly owned subsidiary of Chiquita Holdings Limited, for gross proceeds of approximately $293 million. This transaction is expected to strengthen DOLE’s financial position and increase the Group’s focus on and investments in its core activities.
Last year in November, Dole Fresh Vegetables, a DOLE division, announced the implementation and activation of two General Electric 2.8-Megawatt wind turbines at its salad processing plant in Soledad, California.
Timothy Escamilla, President of Dole Fresh Vegetables, said, “The turbines are projected to produce over 19 million kilowatt hours of clean electricity per year, which will result in a 70% offset to our overall energy consumption at this site.”
During the fiscal fourth quarter that ended December 31, 2022, DOLE’s revenue increased 4.7% year-over-year to $2.36 billion. Its gross profit grew 66.6% from the year-ago value to $157.29 million. The company’s operating income and net income came in at $31.73 million and $13.31 million, compared to an operating loss and net loss of $36.82 million and $24.58 million in the previous year’s quarter, respectively.
In addition, its adjusted EBITDA increased 21.7% year-over-year to $74.39 million. Also, DOLE’s EPS came in at $0.07 compared to a loss per share of $ 0.31 in the year-ago period.
Analysts expect DOLE’s EPS for the fiscal year 2024 to increase 16.5% year-over-year to $1.11. The company surpassed the EPS estimates in each of the trailing four quarters.
DOLE’s revenue has grown at 30.4% and 18.6% CAGRs over the past three and five years, respectively. Also, its EBITDA has grown at a 40.8% CAGR over the past three years.
DOLE shares have gained 27% over the past six months to close the last trading session at $11.72.
DOLE’s POWR Ratings reflect these strong prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value. Out of 25 stocks in the same industry, it is ranked #3. Click here to see the additional ratings for DOLE (Momentum, Stability, Sentiment, and Quality).
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ADM shares were trading at $76.70 per share on Wednesday afternoon, down $2.25 (-2.85%). Year-to-date, ADM has declined -16.94%, versus a 0.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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