U.S. farm trade hit new highs in 2021. Net U.S. farm income stood at a record $117 billion in 2021, its highest level in eight years, owing to a rise in prices, strong global demand, and massive government payouts. According to the agricultural outlook forum released by USDA in February, commodity prices and farm exports are expected to grow to record levels. And farmers are expected to plant an additional 2.1 million acres of the eight major field crops.
The bullish sentiment surrounding the industry is evidenced by the iShares MSCI Global Agriculture Producers ETF’s (VEGI) 17.6% returns over the past year. The ETF is currently trading close to its all-time high.
Given the backdrop, we believe it could be wise to invest in agriculture stocks Archer-Daniels-Midland Company (ADM), Tyson Foods, Inc. (TSN), and Bunge Limited (BG), which have significant growth potential.
Archer-Daniels-Midland Company (ADM)
ADM in Chicago procures, stores, processes, transports, and merchandises agricultural commodities, products, and ingredients in the U.S. and internationally. The company operates through three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.
Last month, ADM increased its quarterly dividend by 8.1% to $0.40. The dividend increase is in the wake of outstanding financial results in fiscal 2021 and a strong outlook for fiscal 2022.
Also last month, ADM partnered with Wolf Carbon Solutions to advance the decarbonization of ADM’s footprint via the construction of a pipeline, developed and operated by Wolf Carbon Solutions. This partnership might allow ADM to deliver on its integrated ESG strategies and promote sustainability.
Last December, ADM acquired Flavor Infusion International, S.A. (FISA). With this acquisition, ADM added an experienced team of 60 employees who serve a vast range of food and beverage customers across Latin America and the Caribbean. This is expected to expand ADM’s growth opportunities in Latin America and the Caribbean in the high-value Nutrition segment, with the flavors business being an important driver for the segment’s success. In its fiscal 2021 fourth quarter, ended Dec. 31, ADM’s revenues increased 28.4% year-over-year to $23.09 billion. ADM’s gross profit increased 22% year-over-year to $1.65 billion. Its net earnings attributable to ADM increased 13.8% from the year-ago value to $782 million. The company’s earnings per share increased 13.1% from its year-ago value to $1.38.
The $20.07 billion consensus revenue estimate for its fiscal first quarter, ending March 31, 2022, represents 6.3% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock gained 49.6% in price to close yesterday’s trading session at $75.53.
ADM’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ADB has a B grade for Value, Growth, Stability, and Sentiment. Within the Agriculture industry, it is ranked #1 of 27 stocks. To see additional POWR Ratings (Momentum and Quality) for ADM, click here.
Tyson Foods, Inc. (TSN)
Tyson Foods in Springdale, Ark., is an American food company that operates worldwide together with its subsidiaries. The company operates through four segments: Pork; Beef; Chicken; and Prepared Foods. It operates a portfolio of products and brands, which includes Tyson, Hillshire Farm, Jimmy Dean, Ball Park, Aidells, and State Fair.
Last December, TSN highlighted its growth strategies during its Virtual Investor Day. It plans to open 12 new plants over the next two years and invest more than $1.30 billion in new automation capabilities. Its new productivity program is expected to deliver more than $1 billion in recurring savings by fiscal 2024.
In its fiscal 2021 fourth quarter, ended October 2, TSN’s sales increased 11.8% year-over-year to $12.81 billion and its gross profit grew 53.8% year-over-year to $2.48 billion. TSN’s adjusted operating income increased 26.5% year-over-year to $1.15 billion. Its net income attributable to Tyson increased 107.2% from its year-ago value to $1.36 billion. And the company’s adjusted net income per share attributable to Tyson increased 35.3% from its year-ago value to $2.30.
Analysts expect TSN’s revenue for its fiscal second quarter of 2022, ending March 31, to come in at $12.49 billion, representing a 10.5% rise year-over-year. The Street expects the company’s EPS to be $1.48, representing a 10.6% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters.
Shares of TSN have increased 64% in price over the past year and closed yesterday’s trading session at $25.90.
TSN has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has a grade of A for Value and a B for Growth and Sentiment. It is ranked #6 of 85 stocks in the B-rated Food Makers industry. Click here to see TSN ratings for Momentum, Quality, and Stability.
Bunge Limited (BG)
BG is an American agribusiness and food company. The White Plains, N.Y. company operates through five segments: Agribusiness; Milling Products; Edible Oil Products; fertilizers; and Sugar and Bioenergy.
Last December, BG refinanced its $1.75 billion, three-year revolving credit facility that is linked to five core sustainability targets. The targets include science-based targets (SBTs) that define BG’s climate goals within the company’s operations and its commitment to eliminate deforestation in its supply chains by 2025. The sustainability-linked loan is expected to fund BG’s annual ESG expenses and bring forward sustainable solutions worldwide.
In its fiscal 2021 third quarter, ended September 30, BG’s adjusted total segment EBIT increased 30.9% year-over-year to $670 million. Its net income attributable to Bunge rose 149.2% from the prior-year quarter to $653 million. In addition, the company’s adjusted net income per common share increased 50.6% from its year-ago value to $3.72.
BG’s revenues are expected to improve 22.9% year-over-year to $15.49 billion for its fiscal fourth quarter, ended Dec. 31, 2021. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters.
Over the past year, BG has gained 48.6% to close yesterday’s trading session at $99.99.
BG has an overall B rating, which translates to Buy in our proprietary rating system. It also has a B grade for Value, and Growth. Among the 27 stocks in the Agriculture industry, it is ranked #4. Click here to see the additional POWR Ratings for Sentiment, Quality, and Stability for BG.
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ADM shares were trading at $76.46 per share on Wednesday afternoon, up $0.93 (+1.23%). Year-to-date, ADM has gained 13.12%, versus a -3.99% 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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