Despite the challenging macroeconomic conditions, 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 and the ever-rising need for food products.
Amid this backdrop, it could be wise to keep track of fundamentally strong agriculture stocks Dole plc (DOLE), Archer-Daniels-Midland Company (ADM) and Bunge Global SA (BG) with high potential for November gains. But before diving deeper into the stock fundamentals, let's first explore the industry landscape.
Due to supply-related issues brought on by the Ukraine-Russian war, the agriculture sector took a significant hit last year. Agri-commodity prices increased as a result of supply chain restrictions. The agriculture sector will remain in the spotlight, with food shortages due to supply disruptions, changing weather patterns, and geopolitical concerns.
On the other hand, as the global population hit 8 billion last year, there is an increasing need for agricultural products. In an effort to meet the rising demand, nations have increased productivity.
Government spending on agriculture is also increasing. It reached record levels of $851 billion per year during 2020-22 for the 54 countries covered by a new OECD report, which is nearly a 2.5-fold rise compared to two decades ago.
For example, to promote domestic competitiveness and counteract rising fertilizer costs brought on by the conflict in Ukraine, the USDA made $500 million available under the Fertilizer Production Expansion Program (FPEP) in 2022. Up to $400 million more in FPEP finance is now being provided by the Commodity Credit Corporation.
According to the business research company, the global agriculture market is expected to grow at a CAGR of 9.1% to reach $19 trillion by 2027.
With such constructive views in mind about the Agriculture industry, let’s now discuss the individual stock fundamentals, starting with the third choice.
Stock #3: 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.
On October 2, 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 third quarter that ended September 30, 2023, DOLE’s revenue increased 4.2% year-over-year to $2.04 billion. The company’s net income came in at $54 million, increasing 15.9% from the prior-year quarter.
In addition, its adjusted EBITDA increased 7.6% from the prior year period to $85.20 million. Also, DOLE’s adjusted EPS came in at $0.24.
Analysts expect DOLE’s EPS for the second quarter of fiscal 2024 (ending March 2024) to increase 6.5% year-over-year to $0.36. DOLE’s revenue is projected to reach $2.12 billion for the same period, showing a growth of 7.2% year-over-year. Moreover, the company has an impressive surprise earnings history, surpassing consensus EPS estimates in each of the trailing four quarters.
DOLE shares have gained 29.9% over the past year to close the last trading session at $11.95. It has also gained 23.8% year-to-date.
DOLE’s POWR Ratings reflect this strong outlook. It has a B grade for Value and Sentiment. Out of 26 stocks in the Agriculture industry, it is ranked #7. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Click here to see the additional ratings for DOLE (Growth, Momentum, Stability and Quality).
Stock #2: Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. The company operates in three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.
On November 14, ADM and Marathon Petroleum Corporation (MPC) inaugurated their joint venture, Green Bison Soy Processing, North Dakota's first dedicated soybean processing complex, producing 600 million pounds of refined soybean oil annually for approximately 75 million gallons of renewable green diesel.
The venture positions ADM and MPC as leaders in meeting the rising demand for renewable fuels, contributing to the transformative opportunity in the oilseed industry.
In the same month, ADM declared a cash dividend of 45 cents per share on its common stock, payable to shareholders on December 6, 2023. This marks the company's 368th consecutive quarterly dividend, reflecting over 92 years of uninterrupted dividends. The consistent dividend payment showcases ADM's financial stability and commitment to delivering value to shareholders.
ADM’s revenues for the fiscal third quarter ended September 30, 2023, came in at $21.70 billion. The company’s gross profit came in at $1.81 billion. Its adjusted net earnings for the period came in at $880 million, while adjusted EPS came in at $1.63.
For the fiscal fourth quarter (ending December 2023), analysts expect ADM’s revenue and EPS to come in at $24.67 billion and $1.66, respectively. Over the past five days, the stock has gained 2.9% to close the last trading session at $74.24. It also gained marginally intraday.
ADM’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, translating to Buy in our proprietary rating system.
It has a B grade for Sentiment and Quality. It is ranked #6 out of 26 stocks in the same industry. To see ADM’s Growth, Value, Momentum, and Stability ratings, click here.
Stock #1: Bunge Global SA (BG)
BG is a global agribusiness and food company with operations in various sectors. It offers agricultural commodity products, oils, fats, sugar, ethanol, and corn milling products, organized into four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy.
On October 5, BG announced that its shareholders approved the acquisition of Viterra Limited. Greg Heckman, BG’s CEO, said, “We appreciate our shareholders’ vote of confidence in our strategy to position Bunge as a premier global agribusiness solutions company through the merger with Viterra.”
The company also announced approval for its redomestication strategy to change its place of incorporation and residence of the parent company to Switzerland from Bermuda, which the company completed last month.
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. Its net income increased 1.6% from the prior-year quarter to $389 million.
Street expects BG’s revenue and EPS to be $15.38 billion and $2.85 for the fiscal fourth quarter (ending December 2023). The stock has gained 16.1% over the past six months and 7% over the past year to close the last trading session at $106.79.
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. Click here to see the other ratings of BG for Momentum, Stability, Sentiment, and Quality.
What To Do Next?
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ADM shares were trading at $73.78 per share on Thursday afternoon, down $0.46 (-0.62%). Year-to-date, ADM has declined -18.70%, versus a 18.77% 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.
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