Food prices have been rising over the past couple of months due to crop failures in China and heat waves in the United States. This, coupled with supply chain bottlenecks, has caused the consumer price index to rise 5.4% year-over-year in June, its highest monthly gain since August 2008.
The introduction of technology in agricultural operations and the use of good-quality fertilizers to get better crop quality and yield should help agricultural stocks to grow substantially.
Given this backdrop, we believe it is wise to invest now in fundamentally sound agricultural names The Mosaic Company (MOS), Bunge Limited (BG), CF Industries Holdings, Inc. (CF), and Intrepid Potash, Inc. (IPI).
The Mosaic Company (MOS)
Plymouth, Minn.-based MOS produces and markets concentrated phosphate and potash crop nutrients internationally. The company also provides nitrogen-based crop nutrients and animal feed ingredients and other ancillary services. MOS sells its products to wholesale distributors, retail chains, farmers, cooperatives, independent retailers, and national accounts.
In its May 2021 sales and volume report, MOS reported a 39.8% year-over-year improvement in Potash sales, generating $246 million in revenues. From its Mosaic Fertilizantes and Phosphates segments, the company achieved year-over-year sales growth of 29.2% and 52.8%, respectively, to $336 million and $327 million. Also, reflecting significant improvement from the prior month, the company hopes to generate healthy sales and significant returns in the coming months.
On March 23, MOS collaborated with AgBiome, a biotechnology company that develops innovative agricultural products for crop protection, to develop and launch novel biological approaches to enhance soil fertility in the pursuit of better crop quality and yield. MOS hopes to use AgBiome’s industry leading expertise in soil health and product development and its global distribution and sales network.
MOS’ net sales for its fiscal first quarter, ended March 31, 2021, increased 27.8% year-over-year to $2.30 billion. The company’s gross profit came in at $434.90 million, up 950.5% from the prior-year period. Its operating earnings were $313.20 million for the quarter versus a $66.20 million operating loss in the prior-year period. MOS’ net earnings have been reported at $156.70 million, compared to a $203 million net loss in the year-ago period. Its adjusted EPS came in at $0.57, compared to a $0.06 loss per share in the prior-year period. The company had $692 million in cash and cash equivalents as of March 31, 2021.
A $0.95 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 313% improvement year-over-year. MOS surpassed consensus EPS estimates in each of the trailing four quarters. A $3.26 billion consensus revenue estimate for the current quarter represents a 37.1% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 7% rate per annum over the next five years. The stock has gained 137.3% over the past year and 61% over the past nine months. It closed yesterday's trading session at $31.08.
It’s no surprise that MOS has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth, and a B grade for Value. Click here to see the additional ratings for MOS (Stability, Sentiment, Quality, and Momentum).
MOS is ranked #7 of 31 stocks in the Agriculture industry.
Bunge Limited (BG)
Operating as a global agribusiness and food company, BG buys, stores, processes, sells and transports oilseeds and grains to make protein meal for animal feed and edible oil products for commercial customers. It also produces sugar and ethanol from sugarcane, mills wheat, and corn, as well as sells fertilizers. BG is based in White Plains, N.Y.
On July 9, BG completed the sale of 35 of its U.S. grain elevators to Zen-Noh Grain Corporation, a provider of agricultural products and services. This transaction should allow BG to operate more efficiently and reinvest in higher returning areas, while reducing costs and strengthening its balance sheet.
In May , BG and Target, a South American logistics and technology solutions provider, partnered to form Vector, a new enterprise focused on digitizing truck freight hiring and other services in Brazil. Named after its freight contracting app launched last year, this new enterprise will now offer the platform’s logistics services to other companies and help increase their drivers’ productivity. Both companies expect to achieve expanded market reach in the near-term.
For its fiscal first quarter, ended March 31, 2021, BG’s net sales increased 41.3% year-over-year to $12.96 billion. The company’s gross profit came in at $1.15 billion, up 559.2% from the prior-year period. Its adjusted net income has been reported at $471 million, which represents a 238.8% year-over-year improvement. BG’s adjusted EPS increased 244% year-over-year to $3.13. As of March 31, 2021, the company had $226 million in cash and cash equivalents.BG surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expects its revenue to be $11.73 billion for the current quarter, ending September 30, 2021, representing a 15.5% rise year-over-year. The stock has gained 81.2% over the past year and 45.6% over the past nine months. It ended yesterday’s trading session at $75.94.
BG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value. Click here to see the additional ratings for BG (Growth, Sentiment, Stability, Quality, and Momentum).
BG is ranked #6 in the Agriculture industry.
CF Industries Holdings, Inc. (CF)
CF in Deerfield, Ill., manufactures and sells hydrogen and nitrogen products for clean energy, fertilizer, emissions abatement, and other industrial applications worldwide. The company primarily serves cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users.
On April 22,CF signed an engineering and procurement contract with Thyssenkrupp, a German multinational conglomerate engaged in industrial engineering and steel production, to supply a 20 MW alkaline water electrolysis plant to produce green hydrogen for its green ammonia project at its Donaldsonville, Louisiana manufacturing complex. Expected to produce 20,000 tons of green ammonia per year, this project will become the largest of its kind in North America and should reduce CF’s carbon footprint significantly by 2023.
CF’s net sales for its fiscal first quarter, ended March 31, 2021, increased 7.9% year-over-year to $1.05 billion. The company’s gross profit has been reported at $289 million, which represents a 41.7% year-over-year improvement. Its operating earnings came in at $247 million, up 68% from the prior-year period. While CF’s net income increased 92.3% year-over-year to $175 million, its EPS increased 125.8% year-over-year to $0.70. As of March 31, 2021, the company had $804 million in cash and cash equivalents.
Analysts expect CF’s EPS for the current quarter, ending September 30, 2021, to be $0.91, up 800% year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. For the current quarter, analysts expect CF’s revenue to be $1.32 billion, representing a 48.7% rise from the prior-year period. CF has gained 66.4% over the past nine months to close yesterday’s trading session at $49.59.
CF’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.
The stock has a B grade for Quality and Sentiment. We have also graded CF for Growth, Value, Stability, and Momentum. Click here to access all CF’s ratings.
CF is ranked #12 in the Agriculture industry.
Intrepid Potash, Inc. (IPI)
IPI engages in the production and sale of potash and langbeinite products internationally. The company sells potash into the agricultural, industrial animal feed markets primarily. IPI is based in Denver, Colo.
In response to limited supply and rising prices in the barge and inland warehouse potash markets, on June 23, IPI increased its potash price by $90 per ton and its Trio price by $35 per ton on all products. IPI expects to generate significant revenues in the near-term.
IPI’s sales for its fiscal first quarter, ended March 31, 2021, increased 11.7% year-over-year to $71.46 million. The company’s gross profit has been reported at $9.11 million, which represents a 62% year-over-year improvement. Its operating income came in at $2.87 million, compared to a $6.78 million loss in the prior-year period. IPI’s adjusted net income has been reported at $2.45 million for the quarter, compared to a $2.02 million loss in the year-ago period. Its adjusted EPS came in at $0.18, compared to a $0.15 loss per share in the prior-year period. The company had $36 million in cash and cash equivalents as of March 31, 2021.
A $0.48 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 161.5% rise from the prior-year period. Analysts’ estimate its revenue to be $55.27 million for the current quarter. This represents a 34.5% year-over-year improvement. IPI has gained 302.7% over the past year and 218.8% over the past nine months. It closed yesterday’s trading session at $32.29.
IPI’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
IPI has an A grade for Momentum, and a B grade for Growth and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see IPI’s ratings for Value, Sentiment, and Stability here.
IPI is ranked #9 in the Agriculture industry.
MOS shares were trading at $30.32 per share on Thursday afternoon, down $0.76 (-2.45%). Year-to-date, MOS has gained 32.24%, versus a 16.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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