Over the past years, the agriculture industry has transformed with rising investment in emerging technologies that can potentially increase yields while improving efficiency. Driven by increasing population, climate conditions, and food quality, quantity, and security issues, AI in the Agricultural industry has witnessed tremendous growth in recent years.
As per BI Intelligence Research, global spending on smart, connected agricultural technologies and systems, including AI and machine learning, is projected to triple in revenue by 2025, reaching $15.30 billion. The growing integration of AI and IoT in agricultural operations further expands growth opportunities for autonomous farm equipment.
Moreover, the increasing use of tractors and combined harvesters integrated with auto-steering capabilities and the rising role of drones in farming activities should support growth. The global autonomous farm equipment market is anticipated to grow at a significant CAGR of around 10.2% from 2023 to 2029.
However, the industry has been facing headwinds from escalating prices of fertilizers.
While we think agriculture stocks Archer-Daniels-Midland Company (ADM), Nutrien Ltd. (NTR), The Mosaic Company (MOS), and CF Industries Holdings, Inc. (CF) might be ideal buys, Cronos Group Inc. (CRON) could be best avoided, given its fundamental weakness.
Stocks to Buy:
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 February 6, 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.
As more people recognize the links between the gut microbiome and many aspects of health and look for products tailored to their specific needs, ADM expects its customer base to triple over the next five years.
In terms of its forward non-GAAP P/E, ADM is currently trading at 11.81x, which is 37.9% lower than the industry average of 19.02x. Its forward Price/Sales multiple of 0.45 is 65.2% lower than the industry average of 1.28.
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’s dividend payouts have increased at a 4.6% CAGR over the past three years. Its current annual dividend of $1.80 yields 2.18% on the prevailing prices, while its four-year average yield is 2.72%.
ADM’s total revenues increased 13.6% year-over-year to $26.23 billion during the fourth quarter that 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.
Analysts expect ADM’s revenue to increase 2.8% year-over-year to $24.32 billion in the current quarter ending March 2023. The company will likely report an EPS of $1.77 in the same quarter. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 9.1% over the past year to close the last trading session at $82.56. It 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 Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth and Sentiment. It is ranked #5 out of 28 stocks in the Agriculture industry.
To access the additional ADM ratings for Value, Momentum, Stability, and Quality, click here.
Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR is 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 non-GAAP P/E multiple of 5.99 is 58.3% lower than the industry average of 14.38. In terms of its forward non-GAAP PEG, the stock is currently trading at 0.13x, which is 92.9% below the industry average of 1.78x.
The company pays a $1.92 per share dividend annually, which translates to a 2.32% yield on the current price. Its dividend payments have grown at a CAGR of 2.9% over the past three years. The company has a four-year average dividend yield of 3.29%.
NTR’s sales rose 35.9% year-over-year to $8.19 billion for the third quarter (ended September 30, 2022). Its net earnings increased 118% year-over-year to $1.58 billion. Moreover, the company’s adjusted net earnings per share increased 81.9% year-over-year to $2.51.
Street expects NTR’s revenue to increase 39.9% year-over-year to $37.59 billion in the fiscal year that ended December 2022. Its EPS is expected to increase 121.6% year-over-year to $13.80 for the same year.
Over the past three months, the stock has gained 12.9% to close the last trading session at $82.74. It has a 60-month beta of 0.88.
NTR’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
NTR has a B grade for Growth, Value, and Quality. Within the same industry, it is ranked #6.
Beyond what is stated above, we’ve also rated NTR for Momentum, Stability, and Sentiment. Get all NTR ratings here.
The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes.
In terms of its forward non-GAAP PEG, MOS is currently trading at 0.04x, which is 98% lower than the industry average of 1.78x. Its forward non-GAAP EV/EBITDA multiple of 3.25 is 58.6% lower than the industry average of 7.84.
MOS pays $0.80 annually as dividends, which translates to a yield of 1.60% on the prevailing price, higher than the four-year average dividend yield of 0.85%. The company has increased its dividend payouts at a CAGR of 47.6% over the past three years.
MOS’ net sales increased 56.5% year-over-year to $5.35 billion in the fiscal third quarter that ended September 30, 2022. Its net earnings grew 126.3% year-over-year to $841.70 million. Also, its EPS increased 149.5% year-over-year to $2.42.
MOS’s revenue is expected to rise 53.5% year-over-year to $18.97 billion for the fiscal year that ended December 2022. The company’s EPS for the same year is expected to increase 128.5% year-over-year to $11.52.
The stock has gained 14.3% year-to-date, closing the last trading session at $50.14. Its 24-month beta is 0.95.
MOS’ POWR Ratings reflect this positive outlook. It has an overall B rating, equating to a Buy. It has an A grade for Value and a B for Quality. It is ranked #10 in the same industry.
Click here for additional POWR Ratings for Growth, Sentiment, Momentum, and Stability for MOS.
CF Industries Holdings, Inc. (CF)
CF produces and sells hydrogen and nitrogen products for energy, fertilizer, emissions abatement, and other industrial activities worldwide. The company mainly serves cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users.
On January 17, CF announced that it had signed a memorandum of understanding (MOU) with JERA Co., Inc., a Japanese energy generator, regarding the supply of up to 500,000 metric tonnes per year of clean ammonia beginning in 2027.
Also, CF is constructing North America’s first commercial-scale green ammonia capacity at its Donaldsonville Complex, enabling up to 20,000 tons of green ammonia production beginning in 2024.
CF’s forward EV/EBIT multiple of 3.74 is 67% lower than the industry average of 11.34. In terms of its forward non-GAAP PEG, the stock is currently trading at 0.07x, 96% lower than the industry average of 1.78x.
On January 31, CF declared a $0.40 per share dividend on its common stock, payable on February 28, 2023.
The company pays $1.60 as dividends annually, which translates to a yield of 1.86% at the current price. It has a 4-year average dividend yield of 1.60%. Over the past three years, its dividend payments have grown at a CAGR of 7.7%. The company has paid dividends for 16 consecutive years.
During the fiscal third quarter that ended September 30, 2022, CF’s net sales rose 70.4% year-over-year to $2.32 billion. Adjusted EBITDA increased 101.4% from the same quarter the prior year to $983 million, while its net earnings attributable to common stockholders increased 336.8% year-over-year to $438 million.
CF’s revenue is expected to rise 74.1% year-over-year to $11.38 billion in the fiscal year that ended December 2022. Its EPS is likely to increase 181.8% year-over-year to $18.03 for the same year.
Over the past year, the stock has gained 27.6% to close the last trading session at $85.39. Its 24-month beta is 0.49.
CF has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and B for Value. It is ranked #9 within the same industry.
In addition to the POWR Ratings highlighted above, one can access CF’s ratings for Growth, Momentum, Stability, and Sentiment here.
Stock to Avoid:
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 9.90 is 102.7% higher than the industry average of 4.88.
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 12.6% year-over-year to $22.46 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.
Over the past year, the stock has declined 33.1%, closing the last trading session at $2.43. The stock has a 24-month beta of 1.43.
CRON’s bleak prospects are reflected in its POWR Ratings. It has an overall D rating, which translates to a Sell in our POWR Ratings system.
CRON has an F grade for Momentum and a D for Value, Stability, and Quality. It is ranked #25 in the same industry.
To see the additional POWR Ratings for Growth and Sentiment for CRON, click here.
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ADM shares were trading at $82.17 per share on Tuesday morning, down $0.39 (-0.47%). Year-to-date, ADM has declined -11.50%, versus a 6.88% 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.
4 Agriculture Stocks With Room to Grow in 2023 and 1 to Sell StockNews.com
