The agricultural industry has grown exponentially this year, driven by robust demand and high food prices. The sharp spike in food prices is mainly attributed to the Russia-Ukraine war and the rising cost of fertilizer and energy over the past year.
Curtailed food supply due to the Russia-Ukraine war and food commodity export bans by countries like Ukraine and India have worsened the supply chain disruptions. And an imbalance between the demand and supply has led to food prices surging to record highs.
Despite dropping 0.6% in May to 157.4 points, the World Food Price Index is still close to its record high of 159.7 points, which was hit in March. The surging food prices are majorly benefitting the agriculture industry. The investors’ bullish sentiment in the industry is evident from Invesco DB Agriculture ETF’s (DBAs) 19.1% gains over the past year.
Given the sharp spikes in food commodity prices, adding outperforming agriculture stocks Nutrien Ltd. (NTR) and Bunge Limited (BG) could be wise. These stocks have a ‘Strong Buy’ or ‘Buy’ rating in our proprietary POWR Ratings system.
Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR provides crop inputs and services. The company operates in four segments: Retail Ag Solutions; Potash; nitrogen; and Phosphate. It distributes crop nutrients, crop protection products, seeds, and merchandise products in the United States, Canada, South America, and Australia through more than 2,000 retail locations.
On June 9, NTR announced its plans to increase fertilizer production capability and return additional capital to shareholders. The company will ramp up potash production to 18 million tonnes in 2025 by hiring and training roughly 350 people and investing in underground mining equipment, mine development, and loadout capacity. Also, it will repurchase an additional $2 billion shares in 2022.
On May 19, PCS Nitrogen Fertilizer LP, a wholly-owned subsidiary of NTR, and Denbury Carbon Solutions, LLC, a wholly-owned subsidiary of Denbury Inc. (DEN), reached a term-sheet agreement under which DEN will transport and store carbon dioxide (CO2) captured from NTR’s new clean ammonia project at Geismar, Louisiana.
In the fiscal 2022 first quarter ended March 31, 2022, NTR’s sales increased 64.4% year-over-year to $7.66 billion, and its gross margin improved 181.8% from the prior-year period to $3.26 billion.
The company’s adjusted EBITDA grew 224.4% year-over-year to $2.62 billion. Its net earnings and adjusted earnings per share came in at $1.39 billion and $2.70, up 941.4% and 831% year-over-year, respectively.
The $15.22 billion consensus revenue estimate for the fiscal 2022 second quarter ending June 2022 represents a 59.5% improvement from the same period last year. Analysts expect NTR’s EPS for the current quarter to increase 186.2% year-over-year to $5.96.
The stock has gained 15.3% year-to-date and 44.4% over the past year to close the last trading session at $86.28.
NTR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NTR has a B grade for Value, Growth, Sentiment, and Quality. Within the Agriculture industry, it is ranked #3 of 34 stocks. Click here to access additional POWR Ratings (Stability and Momentum) for NTR.
Bunge Limited (BG)
BG is a leading agribusiness and food company. The company operates through four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy. BG stores, transports, processes, and sells agricultural commodities and commodity products. It also sells packaged and bulk oils, die-cut pellets, corn milling, and non-GMO products.
On May 12, BG’s Board of Directors declared a regular quarterly cash dividend of $0.625 per common share, payable on September 2, 2022. This marks an increase of 19% ($0.01) in the quarterly cash dividend. BG’s regular cash dividend payment reflects its strong financial position and healthy cash flows.
On May 2, Bunge North America, Inc., a BG subsidiary, and Chevron USA Inc., a subsidiary of Chevron Corporation (CLC), launched renewable fuel feedstocks joint venture. The new company will leverage BG’s expertise in oilseed processing and farmer relationships and CVX’s expertise in fuel manufacturing and marketing.
BG’s net sales from Agribusiness increased 14.7% year-over-year to $11.23 billion, and net sales from Refined & Specialty Oils grew 45.9% year-over-year to $3.98 billion in the fiscal 2022 first quarter, ended March 31, 2022. adjusted total segment EBIT improved 19.2% from the prior-year period to $680 million. The company’s adjusted net income per common share rose 36.1% year-over-year to $4.26.
Analysts expect BG’s revenue for the fiscal 2022 second quarter ending June 2022 to come in at $18.57 billion, representing a 20.7% rise year-over-year. The street expects the company’s EPS for the ongoing quarter to come in at $3.14, representing a growth of 20.2% year-over-year. The company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
BG’s shares have gained 16.7% over the past year and closed the last trading session at $93.06.
BG’s POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
BG has a grade of B for Sentiment and Growth. It is ranked #9 of 34 stocks in the Agriculture industry. Click here to see BG’s POWR Ratings for Value, Stability, Quality, and Momentum.
NTR shares were trading at $80.52 per share on Thursday afternoon, down $5.76 (-6.68%). Year-to-date, NTR has gained 7.58%, versus a -20.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More…
More Resources for the Stocks in this Article