While significant data infusion, biofertilizers, and innovative technologies have transformed agriculture today, eco-friendliness and sustainability should drive the future of food production. As per Statista, gross production value in agriculture in the U.S. is projected to amount to $312.40 billion in 2023.
In addition, vertical farming, often called the future of agriculture, is being vouched as the greener alternative to traditional farming in the U.S. The rapid adoption of technological advancements is driving vertical farming to increase crop productivity without expanding land use. The global vertical farming market is anticipated to reach $11.20 billion by 2028, recording a remarkable CAGR of 25.2%.
Moreover, the global autonomous farm equipment market is anticipated to grow at a significant CAGR of around 10.2% from 2023 to 2029. The penetration of GPS technology in the agriculture sector for real-time tracking and route location is expected to drive the demand for autonomous farm equipment.
Therefore, agriculture stocks Archer-Daniels-Midland Company (ADM), Nutrien Ltd. (NTR), Dole plc (DOLE) might be ideal buys.
However, rising fertilizer prices and labor shortages continue to impact the industry. So, we think fundamentally weak Cronos Group Inc. (CRON) is best avoided now.
Stocks to Buy:
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients. The company operates in three segments: Ag Services and Oilseeds; Carbohydrate Solutions, and Nutrition.
On February 06, ADM announced that it had opened a new production facility in Valencia, Spain, to help meet the rising global demand for probiotics, postbiotics, and other products that support health and well-being. ADM is on its way to realizing its ambition to increase health and wellness revenue from over $500 million in 2022 to $2 billion within ten years.
ADM’s forward EV/Sales of 0.54x is 69.5% lower than the industry average of 1.75x. Its forward Price/Sales multiple of 0.44 is 62.6% lower than the industry average of 1.18.
On January 26, 2023, ADM announced a raise of 12.5% in the quarterly dividend to $0.45 per share, representing the company’s 50th consecutive year of dividend increases. The dividend is payable on March 2, 2023.
ADM pays $1.80 annually as dividends which translates to a yield of 2.21% at the current price. Its 4-year average dividend yield is 2.71%. Its dividend payouts have grown at 5.4% CAGR over the past three years.
ADM’s revenue increased 13.6% year-over-year to $26.23 billion in the fiscal fourth quarter, which ended December 31, 2022. Its gross profit rose 6.8% from the prior-year quarter to $1.76 billion. The company’s adjusted net earnings and adjusted EPS came in at $1.07 billion and $1.93, rising 25.8% and 28.7% year-over-year, respectively.
ADM’s revenue is expected to rise 2.8% year-over-year to $24.32 billion for the current quarter ending March 2023. The company’s EPS for the same quarter is expected to be $1.77. Additionally, the stock has topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 5.9% over the past year to close the last trading session at $81.42. ADM has a 24-month beta of 0.58.
ADM’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a 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 for Sentiment and Growth. It is ranked #3 out of 28 stocks in the Agriculture industry.
To access additional ratings for ADM’s Value, Stability, Quality, and Momentum, click here.
Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR are a crop inputs, services, and solutions provider, offering potash, nitrogen, phosphate, sulfate products, and financial solutions. In addition, it also distributes crop nutrients, crop protection products, seeds, and merchandise products.
NTR’s forward EV/Sales of 1.42x is 6% lower than the industry average of 1.51x. Its forward Price/Sales multiple of 1.07 is 10% lower than the industry average of 1.18.
On February 15, NTR announced the purchase of up to 5% of NTR’s issued and outstanding common shares over a twelve-month period through a normal course issuer bid (NCIB).
On the same day, the company declared a quarterly dividend of $0.53 per share, payable on April 13, 2023. This represents a 10% increase from the previous dividend.
NTR pays $2.12 annually as dividends which translates to a yield of 2.72% at the current price. Its 4-year average dividend yield is 3.29%. Its dividend payouts have grown at 2.9% CAGRs over the past three years.
During the fourth quarter of fiscal 2022, that ended December 30, 2022, NTR’s sales increased 3.7% year-over-year to $7.53 billion. The company’s net earnings stood at $1.12 billion, and net earnings per share attributable to NTR increased 1.9% year-over-year to $2.15.
NTR’s revenue is expected to be $6.83 billion for the current fiscal quarter ending March 2023. The company’s EPS for the same fiscal quarter is expected to be $2.12.
The stock has gained 3.8% over the past year and 6.7% year-to-date, closing the last trading session at $77.92. The stock’s 60-month beta is 0.88.
It is no surprise NTR has an overall rating of B, which equates to a Buy in our POWR Ratings system.
It has a grade of B for Quality and Value. NTR is ranked #7 in the same industry.
In addition to the POWR ratings stated above, we have also rated NTR for Momentum, Growth, Stability, and Sentiment. Get all the NTR ratings here.
Dole plc (DOLE)
DOLE, headquartered in Dublin, Ireland, engages in sourcing, processing, marketing, and distribution of fresh fruit and vegetables worldwide. The company operates through four segments: Fresh Fruit; Diversified Fresh Produce - EMEA; Diversified Fresh Produce - Americas and ROW; and Fresh Vegetables.
DOLE’s forward EV/Sales of 0.28x is 83.6% lower than the industry average of 1.73x. Its forward Price/Sales multiple of 0.11 is 90.3% lower than the industry average of 1.18.
DOLE pays $0.32 annually as dividends which translates to a yield of 2.81% at the current price. Its 4-year average dividend yield is 1.67%.
DOLE’s revenue increased 16.8% year-over-year to $2.27 billion in the third quarter ended September 30, 2022. On a pro-forma comparative basis, its adjusted EBITDA increased 25.7% year-over-year to $72.98 million. The company’s adjusted EPS increased 100% year-over-year to $0.14.
Street’s revenue estimate of $2.30 billion for the fiscal fourth quarter (ended December 2022) reflects a rise of 2.6% year-over-year. Its EPS for the same quarter is expected to amount to $0.05. Additionally, DOLE has topped consensus EPS estimates in each of the trailing four quarters.
DOLE has gained 24.6% over the past three months to close its last trading session at $11.40. Its 24-month beta is 0.64.
DOLE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
DOLE also has a B grade for Growth, Value, and Sentiment. It is ranked #6 in the same industry.
Click here to access additional ratings for DOLE’s Stability, Quality, and Momentum.
Stock to Sell:
Cronos Group Inc. (CRON)
Headquartered in Toronto, Canada, CRON is a cannabinoid company that manufactures, markets, and distributes hemp-derived supplements and cosmetic products. The company also operates in the cultivation, manufacturing, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets.
CRON’s forward Price/Sales multiple of 9.45 is 104.5% higher than the industry average of 4.62.
CRON’s operating loss amounted to $31 million in the third quarter that ended September 30, 2022. Net loss attributable to CRON came in at $36.99 million, compared to a net income of $77.92 million in the prior-year quarter. Also, its net loss per share from continuing operations came in at $0.10, compared to an EPS of $0.21 in the same quarter the prior year.
Analysts expect CRON’s revenue to decline 13.7% year-over-year to $22.18 million in the fiscal fourth quarter that ended December 2022. Its EPS is expected to be negative $0.05 for the same quarter. The company has failed to surpass the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 42.2% over the past year and 22% over the past three months, closing the last trading session at $2.30. The stock has a 24-month beta of 1.30.
CRON’s grim prospects are reflected in its POWR Ratings. The stock has an overall F rating, which translates to a Strong Sell in our POWR Rating system.
CRON has an F grade for Momentum and a D for Value, Sentiment, Stability, and Quality. It is ranked #24 in the same industry.
To see the additional POWR Rating for Growth for CRON, click here.
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ADM shares were trading at $81.03 per share on Friday morning, down $0.39 (-0.48%). Year-to-date, ADM has declined -12.25%, versus a 6.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 Agriculture Stocks to Feed Your Portfolio in 2023 And 1 to Sell StockNews.com
