As COVID-19 pandemic-related restrictions are eliminated, the agriculture industry’s prospects are getting better. The cost of food in the United States increased 2.4% in April 2021, according to the U.S. Bureau of Labor Statistics. Consequently, agriculture stocks are also gaining favor with investors. This is evidenced by the Invesco DB Agriculture Fund’s (DBA) 17.4% gains over the past six months.
One of the key reasons for rising food prices is heavy demand for food commodities from China. Other factors driving food prices include supply disruptions and a slowdown in shipping. Because these factors are expected to continue driving food prices up in the near term, the agriculture industry is expected to continue benefiting. According to a Meticulous Research report, the agricultural micronutrients market is expected to grow at a 8.7% CAGR between 2020 – 2027.
Given this backdrop, we think it could be wise to bet on CF Industries Holdings, Inc. (CF) and Intrepid Potash, Inc. (IPI). They are well positioned to capitalize on the agriculture industry’s growth.
CF Industries Holdings, Inc. (CF)
CF manufactures and sells hydrogen and nitrogen-based products for fertilizer, emissions abatement, clean energy and other industrial applications worldwide. The company’s principal offerings include anhydrous ammonia, granular urea and urea ammonium nitrate. It serves primarily cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users.
In April, CF announced that it had signed an engineering and procurement contract with thyssenkrupp for its green ammonia project at its manufacturing complex located at Donaldsonville, Louisiana. This could further accelerate the company’s growth.
CF’s net sales increased 7.9% year-over-year to $1.05 billion its fiscal fourth quarter ended March 31, 2021. Its operating earnings grew 68% year-over-year to $247 million, while its net earnings increased 92.3% year-over-year to $175 million. The company’s EPS increased 125.8% year-over-year to $0.70.
Analysts expect CF’s EPS to come in at $0.53 for the quarter ending September 30, 2021, which represents a 507.7% year-over-year increase. It surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 30.4% year-over-year to $1.57 billion for the current quarter, ending June 30, 2021. The stock surged 92.2% over the past year to close yesterday’s trading session at $53.03.
CF’s POWR Ratings reflect this promising outlook. The company has an overall B rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Sentiment and Quality. Within the Agriculture industry, CF is ranked #12 of 31 stocks. To see the additional POWR Ratings for CF (Growth, Value, Stability, and Momentum), click here.
Intrepid Potash, Inc. (IPI)
IPI produces and sells potash and langbeinite products internationally. It operates through three segments: Potash, Trio, and Oilfield Solutions. The Potash segment offers muriate of potash or potassium chloride for use as a fertilizer input in the agricultural market, whereas the Trio segment provides a specialty fertilizer that delivers potassium, sulfate, and magnesium in a single particle.
On May 17, IPI announced that it has increased its Trio and potash prices by $20 per ton. Bob Jornayvaz, the company’s Executive Chairman said, “Tightening supply and strong farmer economics have Intrepid on pace for record domestic deliveries of Trio in the first half of 2021.”
IPI’s revenue climbed 11.7% year-over-year to $71.46 million for its fiscal first quarter ended March 31, 2021. Its operating income came in at $2.87 million compared to a $6.78 million operating loss in the prior-year period. Its net income was $2.45 million compared to a $7.40 million net loss in the year-ago period. Also, the company’s EPS was $0.18 compared to a $0.57 loss per share in the prior-year period.
Analysts expect IPI’s EPS to come in at $0.88 in its fiscal year 2021, which represents a 152.7% year-over-year increase. For the quarter ending September 30, 2021, its revenue is expected to increase 24.4% year-over-year to $51.14 million. The stock surged 149.1% over the past year to close yesterday’s trading session at $26.90.
IPI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Momentum, and a B grade for Growth.
We have also graded IPI for Value, Stability, Sentiment and Quality. Click here to access all IPI’s ratings. IPI is ranked #11 in the same industry.
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CF shares were trading at $52.26 per share on Tuesday afternoon, down $0.77 (-1.45%). Year-to-date, CF has gained 36.71%, versus a 12.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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