Geopolitical unrest has put a dent in agricultural supply. However, numerous countries are implementing programs to raise the production of high-quality crops and increase overall agricultural productivity in response to the sharp rise in the global population.
Amid this backdrop, it could be wise to buy fundamentally strong agriculture stocks Dole plc (DOLE), AGCO Corporation (AGCO), ICL Group Ltd (ICL) and Bunge Global SA (BG), which are currently trading at a discount relative to their peers.
Before diving deeper into their fundamentals, let’s discuss what’s happening in the agriculture industry.
Due to supply-related issues brought on by ongoing geopolitical unrests, the agriculture sector took a significant hit. However, a turnaround seems to be on the cards, as the United Nations food agency's world price index for October fell to its lowest level in more than two years.
On the other hand, the demand for agricultural produce is rising with the growing population, with the global population touching the 8 billion mark last year. Countries have responded to this growing demand by trying to boost productivity.
For instance, to promote domestic competitiveness and counteract rising fertilizer costs brought on by the conflict in Ukraine, the U.S. Department of Agriculture (USDA) made $500 million available under the Fertilizer Production Expansion Program (FPEP) in 2022. In June, the USDA announced that the Commodity Credit Corporation would provide up to $400 million in addition.
On the backs of an anticipated rise in crop production, farming activities, and trade volumes to keep up with a rising population, the global agriculture market is expected to grow at a CAGR of 9.1% to reach $19 trillion by 2027.
After such a bright review of the Agriculture industry, let us take a closer look at the fundamentals of the featured stocks, starting with the fourth stock.
Stock #4: Dole plc (DOLE)
DOLE, headquartered in Dublin, Ireland, engages in sourcing, processing, marketing, and distributing fresh fruit and vegetables. The company operates through four segments: Fresh Fruit; Diversified Fresh Produce – EMEA; Diversified Fresh Produce – Americas and ROW; and Fresh Vegetables.
In October, Dole introduced a new specialist division, DOLE Organics, and a consumer brand, 'GO Organic!,' at Fruit Attraction 2023, focusing on expanding its organic fresh produce range.
This strategic move aims to align DOLE's organic production with global and local growers, improve the consistency and availability of organic products, and appeal to a broader consumer base, potentially boosting the company's presence in the organic produce market.
During the fiscal second quarter that ended June 30, 2023, DOLE’s revenue increased 4.4% year-over-year to $2.14 billion. The company’s net income came in at $52.30 million, increasing 8.1% from the prior-year quarter.
In addition, its adjusted EBITDA increased 9.7% from the prior-year period to $122.70 million. Also, DOLE’s adjusted EPS came in at $0.51.
DOLE’s forward EV/Sales of 0.30x is 82.2% lower than the industry average of 1.67x. Its forward Price/Sales multiple of 0.13 is 88.2% lower than the industry multiple of 1.08.
Analysts expect DOLE’s EPS for the fiscal year 2024 to increase 17.8% year-over-year to $1.17, while its revenue for the same year is projected to improve 2.6% from the prior year to $8.82 billion. The company has an impressive surprise history, topping EPS estimates in each of the trailing four quarters.
DOLE shares have gained 33.5% over the past year and 19.4% year-to-date to close the last trading session at $11.52.
DOLE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating 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 Value and Sentiment. Out of 27 stocks in the Agriculture industry, it is ranked #6. Click here to see the additional ratings for DOLE (Growth, Momentum, Stability, and Quality).
Stock #3: AGCO Corporation (AGCO)
AGCO manufactures agricultural equipment and related replacement parts globally. The company offers tractors, drying and handling equipment systems, implements, and combines for harvesting grain crops.
On October 26, AGCO announced Plevna Implement's expansion into western Indiana through the acquisition of a store and the opening of a new location, providing full-line sales and service for AGCO brands. This expansion is part of AGCO's growth plan in North America, enhancing its presence and services for Indiana farmers.
On September 28, it was reported that AGCO entered into a joint venture with Trimble Inc. (TRMB) to acquire an 85% stake in Trimble's agricultural assets and technologies for $2 billion.
This strategic move enhances AGCO's technology portfolio, supports growth ambitions, and is expected to result in substantial commercial and cost synergies, positioning the company for accelerated growth and better farmer-focused offerings.
For the third quarter that ended September 30, 2023, AGCO’s net sales increased 10.7% year-over-year to $3.46 billion. Its gross profit rose 26.4% from the prior-year quarter to $934 million. Its adjusted net income rose 24.9% from the year-ago value to $297.90 million. Additionally, its adjusted net income per share came in at $3.97, up 24.8% year-over-year.
ACGO’s forward P/E multiple of 7.88 is 60.7% lower than the 20.03 industry multiple. In terms of its forward EV/EBIT, it is trading at 5.91x, 60.1% lower than the industry average of 14.82x.
Street expects AGCO’s EPS and revenue for the fiscal year ending December 2023 to increase 27.4% and 16% from the prior year to $15.82 and $14.68 billion, respectively. It surpassed Street EPS estimates in each of the four trailing quarters.
Over the past five days, the stock has gained 6.9% to close the last trading session at $119.81. It has gained 3.7% over the past month.
AGCO’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has an A grade for Value and a B for Momentum. In addition to the POWR Ratings grades I’ve just highlighted, you can see AGCO’s ratings for Growth, Stability, Sentiment, and Quality here.
Stock #2: ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL and its subsidiaries operate as a specialty minerals and chemicals company worldwide. It operates in four segments: Industrial Products; Potash; Phosphate Solutions; and Growing Solutions.
In August, ICL announced the groundbreaking of its battery materials manufacturing plant in St. Louis, United States. The $400 million facility is expected to be operational by 2025 and should help meet demand from clean-energy industries.
ICL’s sales for the second quarter of 2023 came in at $1.83 billion. Its gross profit came in at $645 million. Its adjusted net income attributable to shareholders came in at $163 million. Additionally, its adjusted EBITDA and adjusted EPS came in at $441 million and $0.13, respectively.
In terms of forward EV/EBIT, ICL is trading at 7.27x, 41.6% lower than the industry average of 12.45x. Its forward Price/Cash Flow multiple of 3.90 is 46.4% lower than the industry average of 7.28.
Street expects ICL’s EPS for the fiscal year ending December 2024 to increase 4.6% year-over-year to $0.55. Its revenue is expected to be $7.48 billion for the same year.
The stock gained 1.2% intraday to close the last trading session at $4.99. It has gained 2.8% over the past five days.
It’s no surprise that ICL has an overall rating of B, which translates to Buy in our POWR Ratings system.
It has an A grade for Value and a B for Quality. It is ranked #3 in the Agriculture industry. To see the additional ratings of ICL for Growth, Momentum, Stability, and Sentiment, click here.
Stock #1: Bunge Global SA (BG)
BG is a global agribusiness and food company with operations in various sectors. It operates through four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy.
On October 5, BG announced that shareholders had approved the acquisition of Viterra Limited and voted in support of the redomestication to change the place of incorporation and residence of the ultimate parent company of the Bunge Group from Bermuda to Switzerland. The acquisition is expected to position BG as a premier agribusiness company.
For the fiscal third quarter that ended on September 30, 2023, BG’s gross profit increased 17.7% year-over-year to $1.05 billion. Its total segment EBIT grew 2.8% from the year-ago value to $584 million.
For the nine months ended September 30, BG’s cash and cash equivalents, restricted cash, and cash held for sale balance improved 120% from the year-ago value to $2.19 billion.
BG’s forward EV/Sales and Price/Sales multiples of 0.33 and 0.26 are 80.1% and 76.3% lower than the industry averages of 1.67 and 1.08, respectively.
For the fiscal year 2023, the company’s EPS and revenue are expected to be $12.83 and $59.98 billion, respectively.
The stock has gained 17.1% over the past six months and 6.6% over the past year to close the last trading session at $106.06.
BG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It also has an A grade for Growth and a B for Value.
In the same industry, it is ranked #2 of 27 stocks. Click here to see the other ratings of BG for Momentum, Stability, Sentiment, and Quality.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
BG shares were trading at $104.86 per share on Monday afternoon, down $1.20 (-1.13%). Year-to-date, BG has gained 7.14%, versus a 14.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
4 Value Agriculture Stocks to Buy TODAY StockNews.com
