With rising demand for high-quality, diverse food products amid a growing population and increasing income levels, innovations in agricultural technology, and changing consumer preferences like high demand for organic and sustainable products, the agriculture market is well-poised for significant growth and expansion in the long term.
Given the industry’s promising prospects, investors could consider buying quality agriculture stocks Adecoagro S.A. (AGRO), ICL Group Ltd (ICL), and Dole plc (DOLE) for potential gains.
Agriculture plays a vital role in sustaining human life and society, providing essential food and resources. According to the Business Research Company report, the global agriculture market size is expected to grow from $13.27 trillion in 2023 to $14.36 trillion in 2024.
In addition, the agriculture market is anticipated to expand at a CAGR of 7.7% during the forecast period, resulting in a market volume of $19.29 trillion by 2028. Rising demand for food and the expansion of agribusiness are primary drivers of the growth of the agriculture market.
Several other factors, such as growing sustainable agriculture practices, organic farming, precision farming, and genetic engineering in crops, will contribute to the market’s profitability.
The global smart agriculture market is expected to reach $54.71 billion, growing at a CAGR of 13.7% from 2014 to 2030. Meanwhile, the U.S. smart agriculture market is projected to grow at a CAGR of 10.4% during the forecast period.
The smart agriculture industry is poised to grow significantly as farmers and organizations are recognizing the value and benefits of adopting tech-driven solutions to improve agricultural efficiency and sustainability. Technological advances like the Internet of Things (IoT), AI, machine learning, drones, and robotics are revolutionizing agriculture.
AI is revolutionizing agriculture by streamlining farming practices and enhancing productivity through data-driven insights. By analyzing vast datasets from sources like weather trends, soil conditions, crop health, and past records, AI systems empower farmers to make informed decisions and lead to increased efficiency, reduced waste, and negative environmental impact.
With these favorable trends in mind, let’s look at the fundamentals of the three best Agriculture stocks, beginning with the third choice.
Stock #3: Adecoagro S.A. (AGRO)
AGRO operates as an agro-industrial company headquartered in Luxembourg. It operates through three segments: Farming; Sugar, Ethanol and Energy; and Land Transformation. It engages in farming crops, rice and other agricultural products; dairy operations and land transformation activities; and sugar, ethanol, and energy production activities.
On October 27, 2023, AGRO’s Board of Directors approved a cash dividend distribution of $17.5 million, representing approximately $0.16 per share, to shareholders of the company of record at the close of business on November 9, 2023, and paid on November 24, 2023.
The dividend distribution is the second of a two-tranche cash dividend paid in two installments. The first installment was paid on May 24, 2023, in an equal cash amount, resulting in an annual cash dividend of $35 million. AGRO pays an annual dividend of $0.33, which translates to a yield of 3.27% at the current share price. Its four-year average dividend yield is 1.33%.
In terms of forward EV/EBITDA, AGRO is currently trading at 4.76x, 57.8% lower than the industry average of 11.29x. Likewise, the stock’s forward Price/Cash Flow multiple of 4.67 is 63.5% lower than the industry average of 12.79x. Also, its forward Price/Sales of 0.78x is 32.8% lower than the industry average of 1.15x.
For the third quarter that ended September 30, 2023, AGRO’s gross sales grew 1.6% from the prior year’s quarter to $387.95 million.. Its profit from operations increased 6.7% year-over-year to $68.14 million. The company’s adjusted EBITDA was $155.30 million, an increase of 27% year-over-year.
In addition, the company’s adjusted net income came in at $88.56 million, or $0.83 per share, up 87.6% and 92.5% year-over-year, respectively. Its total assets as of September 30, 2023, were $3.36 billion, compared to $3.11 billion as of December 31, 2022.
Analysts expect AGRO’s EPS for the fiscal year (ended December 2023) to increase 14.4% year-over-year to $1.29, while its revenue is expected to grow 1.9% year-over-year to $1.38 billion. Also, the company topped the consensus revenue estimates in all four trailing quarters.
Shares of AGRO have surged marginally over the past month and 23.7% over the past year to close the last trading session at $10.01.
AGRO’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Sentiment and Value. It is ranked #3 out of 24 stocks in the Agriculture industry.
Click here to access additional AGRO ratings for Stability, Momentum, Quality, and Growth.
Stock #2: ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL is a global specialty minerals and chemicals company. It operates in four segments: Industrial Products; Potash; Phosphate Solutions; and Growing Solutions.
On December 19, 2023, ICL announced its plan to invest $30 million to develop a customer innovation and qualification center (CIQC) in North America as it continues to execute its long-term plan to offer commercial solutions for the energy storage systems (ESS) market in the United States.
ICL is well-positioned for significant growth as the CIQC will enable the company to accelerate its technology progress while benefiting ICL battery materials customers as they strive towards innovation and advancing their offerings.
In terms of forward EV/Sales, ICL is trading at 1.17x, 22.8% lower than the industry average of 1.51x. Further, the stock’s forward EV/EBITDA multiple of 5.11 is 36.5% lower than the industry average of 8.05. Likewise, its forward Price/Book of 1.11x is 40.7% lower than the industry average of 1.88x.
During the third quarter that ended September 30, 2023, ICL reported sales of $1.86 billion, and its adjusted operating income was $227 million for the same period. The company’s adjusted net income attributable to shareholders and adjusted EPS came in at $137 million and $0.11, respectively.
In addition, the company’s cash inflows from operating activities were $407 million for the quarter.
The company reaffirmed its guidance for the full year 2023 adjusted EBITDA. ICL expects its adjusted EBITDA to range between $1.60 billion and $1.80 billion, with its specialty-focused businesses expected at nearly $700 million.
Analysts expect ICL’s EPS to be $0.08 for the fourth quarter that ended December 2023, and its revenue for the same period is expected to be $1.69 billion. Shares of ICL have gained 15.3% over the past month to close the last trading session at $5.16.
ICL’s sound 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.
The stock has an A grade for Value and a B for Quality and Sentiment. Within the Agriculture industry, ICL is ranked #2 of 24 stocks.
Click here to access other ratings of ICL for Momentum, Growth, and Stability.
Stock #1: Dole plc (DOLE)
Based in Dublin, Ireland, DOLE is involved in the 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.
On November 15, 2023, DOLE’s Board of Directors declared a cash dividend for the third quarter of 2023 of $0.08 per share, paid on January 4, 2024, to shareholders of record on December 14, 2023. The company pays an annual dividend of $0.32, which translates to a yield of 2.88% at the prevailing share price. Its four-year average dividend yield is 2.07%.
On October 2, 2023, DOLE launched Dole Organics, a new specialist division and its new ‘GO Organic!’ consumer brand. Dole Organics is dedicated to bringing renewed impetus to the organic fresh produce category, while Dole’s new GO Organic! brand complements its successful DOLE® Organic banana and pineapple offering already available across Europe.
“In creating Dole Organics and launching our DOLE® GO Organic! brand we are laying foundations and extending an open invitation to independent organic growers and European retailers alike to work together with Dole to collectively bring organic fruit & vegetables to the next level,” said Bengt Nilsson, President of Dole Northern Europe.
In terms of forward non-GAAP P/E, DOLE is trading at 9.53x, 46.6% lower than the industry average of 17.85x. Likewise, the stock’s forward EV/Sales multiple of 0.29 is 82.1% lower than the industry average of 1.64. Also, its forward Price/Sales of 0.13x is 88.8% lower than the industry average of 1.12x.
During the third quarter that ended September 30, 2023, DOLE’s revenue increased 4.2% year-over-year to $2.04 billion. Its adjusted gross profit grew 13.9% from the year-ago value to $165.49 million. The company’s adjusted EBITDA rose 7.6% year-over-year to $85.19 million.
Also, net income attributable to DOLE came in at $45.29 million and $0.48 per share, up 13.7% and 14.3% from the prior year’s quarter, respectively. Its total current assets stood at $1.92 billion as of September 30, 2023, compared to $1.60 billion as of December 31, 2022.
Street expects DOLE’s revenue and EPS for the first quarter (ending March 2024) to increase 6.9% and 13% year-over-year to $2.11 billion and $0.38, respectively. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
DOLE’s stock declined 4.2% over the past month to close the last trading session at $11.11.
DOLE’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
DOLE has an A grade for Value. It has a B grade for Growth, Sentiment, and Quality. It topped the list of 24 stocks in the Agriculture industry.
To see additional POWR Ratings of DOLE for Stability and Momentum, click here.
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ICL shares were unchanged in premarket trading Friday. Year-to-date, ICL has gained 2.99%, versus a 7.04% 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.
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