As the global population grows, the demand for agricultural products remains constant. Adding agricultural stocks to your portfolio can offer diversification benefits and reduce risk, as they have a low correlation with other sectors.
Given the industry’s growing demand and resilient nature, it could be wise for investors to explore three fundamentally sound agricultural stocks AGCO Corporation (AGCO), ICL Group Ltd (ICL), and MariMed Inc. (MRMD). But before delving into the fundamental aspects of the featured stocks, let us take a closer look at the agricultural industry as a whole to gain a better perspective.
In addition to its social and developmental significance, agriculture is pivotal in driving economic growth worldwide. It contributes approximately 4% to the global Gross Domestic Product (GDP), while in certain lesser-developed countries, its contribution can exceed 25% of GDP. This highlights the agricultural sector’s substantial economic impact and significance on both a global and regional scale.
Despite facing numerous challenges such as the pandemic, extreme weather conditions owing to climatic change, pests, and Russia’s invasion of Ukraine that triggered a global food crisis, it is estimated that by 2023 the gross production value within the agriculture market worldwide will reach a substantial figure of $3.69 trillion, exhibiting a CAGR of 5.6% during the forecasted period of 2023-2028.
Moreover, the use of Artificial Intelligence (AI) to enhance productivity and continuous government support to uplift the agricultural sector is driving its long-term growth prospects. The global AI in agriculture market is anticipated to experience significant growth, with a projected market size of $4.9 billion by 2028, exhibiting a CAGR of 24.1%.
Considering all the factors above, the agricultural industry seems well-poised to weather all the macroeconomic challenges. Let us now evaluate the fundamentals of the featured stocks in detail:
AGCO Corporation (AGCO)
AGCO is engaged in manufacturing and distributing agricultural equipment and related replacement parts worldwide. It sells a range of agricultural equipment, including tractors, grain storage bins, seed-processing systems, self-propelled windrowers, forage harvesters, disc mowers, spreaders, rakes, tedders, mower conditioners, etc.
On May 4, AGCO expressed its satisfaction with Atlantic & Southern Equipment’s recent acquisition of C&R Implement Co. in Williamston, North Carolina, as announced on May 1.
This acquisition would expand the presence of AGCO’s brands in eastern North Carolina by introducing Fendt® products alongside the existing Massey Ferguson® product line at the Williamston location.
On the same day, AGCO announced a capital improvement initiative to expand production capacities for Massey Ferguson® and Fendt® Momentum® planters. This project, known as “Planter Accelerate,” will be carried out at AGCO’s facilities in Beloit and Cawker City, Kansas.
This expansion effort encompasses various enhancements, such as optimizing production workflows by creating more available factory space, enhancing material storage areas and receiving docks, and bolstering manufacturing and fabrication capacities.
AGCO’s net sales increased 24.1% year-over-year for the first quarter (ended March 31, 2023) to $3.33 billion, while its gross profit grew 35.4% from the year-ago value to $854.90 million.
The company’s non-GAAP net income amounted to $263.10 million and $3.51 per share, representing a 46.9% increase from the prior-year period. Also, its adjusted income from operations rose 60.1% from the prior-year quarter to $388.80 million.
The consensus EPS estimate of $3.67 for the second quarter (ending June 30, 2023) represents a 54.1% improvement year-over-year. The consensus revenue estimate of $3.70 billion for the current quarter indicates a 25.5% increase from the same period last year. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 32.6% to close the last trading session at $131.87.
AGCO’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Momentum and a B for Growth. In the 28-stock Agriculture industry, it is ranked #2. To see additional ratings of AGCO for Stability, Sentiment, and Quality, click here.
ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL operates as a specialty minerals and chemicals company globally through four segments: Industrial Products; Potash; Phosphate Solutions; and Growing Solutions. Its products include potash and phosphate fertilizers, specialty fertilizers, functional ingredients, flame retardants, and magnesia products.
On April 24, ICL signed a sustainability-linked revolving credit facility worth $1.55 billion with a consortium of 12 leading international banks.
Aviram Lahav, CFO of ICL, commented, “ICL is pleased to expand on its commitment to sustainability by enhancing its revolving credit facility to include targeted and specific sustainability metrics and milestones. This new facility follows our debut sustainability-linked loan in September 2021 and enhances our existing focus on ESG practices and our increased transparency regarding all sustainability issues.”
On January 19, ICL made a significant investment of €2.75 million ($3 million) through its AgriFood innovation and investment platform, ICL Planet Startup Hub, in Arkeon GmbH. This investment aims to support Arkeon's groundbreaking and sustainable one-step fermentation bioprocess. The process involves capturing carbon dioxide (CO2), a greenhouse gas, and converting it into the 20 essential proteinogenic amino acids required for human nutrition.
For the first quarter that ended March 31, 2023, ICL’s sales amounted to $2.09 billion, while its gross profit came in at $828 million. The company’s adjusted operating and net income amounted to $480 million and $292 million for the same period, respectively.
During the same period, its cash and cash equivalents and total current assets stood at $552 million and $4.74 billion, up 32.4% and 4.3% compared to $417 million and $4.54 billion as of December 31, 2022, respectively.
Street expects ICL’s EPS and revenue to amount to $0.79 and $8.18 billion for the current year ending December 2023. Its EPS is expected to increase by 3.9% per annum over the next five years. Additionally, it surpassed the EPS estimates in three of its trailing four quarters, which is impressive.
ICL’s shares have gained 2.4% over the past five days to close the last trading session at $5.95.
ICL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Quality. Within the same industry, it is ranked #3. Click here to see ICL’s ratings for Growth, Momentum, Stability, and Sentiment.
MariMed Inc. (MRMD)
MRMD is engaged in the cultivation, production, and dispensing of medicinal and recreational cannabis. The company sells flowers and concentrates under the Nature's Heritage brand; chewable cannabis-infused mint tablets under the brand Kalm Fusion. In addition, it offers vapes and edible products under the InHouse brand.
On April 4, MRMD disclosed that its wholly-owned subsidiary, Kind Therapeutics USA, had obtained approval from the Maryland Medical Cannabis Commission (MMCC) to commence producing and distributing THC-infused edibles with higher dosages.
MRMD’s CEO Jon Levine expressed excitement about the approval received from the Maryland Medical Cannabis Commission, stating, “We’re thrilled to once again offer higher-dose edibles across our entire product portfolio to the medical cannabis patients of Maryland,”
Additionally, on March 14, MRMD officially completed the transaction to acquire the operating assets of Ermont. With the acquisition of Ermont's operating assets, MRMD established its second medical dispensary in Massachusetts, effectively reaching the maximum limit permitted by state regulations.
MRMD’s CEO mentioned that the company is on track to maximize its presence in Massachusetts, with plans to open a third dispensary in Beverly soon. He further highlighted the company's dedication to providing exceptional customer service and a diverse range of products to cannabis patients in Quincy, leveraging the reputation of Panacea Wellness.
In the first quarter that ended March 31, 2023, MRMD’s revenue increased 24.1% year-over-year to $34.38 million, while its gross profit came in at $15.39 million. The company’s adjusted EBITDA and income from operations amounted to $7.08 million and $5.14 million for the same period, respectively.
During the same period, its cash and cash equivalents and total current assets stood at $21.59 million and $59.37 million, increasing 121.8% and 34.5% compared to $9.74 million and $44.15 million, as of December 31, 2022, respectively.
Analysts expect MRMD’s revenue for the second quarter (ending June 30, 2023) to increase 8.4% year-over-year to $35.75 million. Its revenue for the current year ending December 31, 2023, is expected to be $151.45 million reflecting a 13% improvement year-over-year.
The stock has gained 9.5% year-to-date to close the last trading session at $0.39.
It’s no surprise that MRMD has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Sentiment and Quality. Out of 28 stocks in the same industry, it is ranked #11.
In addition to the POWR Ratings we’ve stated above, we also have MRMD’s ratings for Growth, Value, Momentum, and Stability. Get all MRMD ratings here.
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AGCO shares were trading at $131.14 per share on Tuesday afternoon, down $0.73 (-0.55%). Year-to-date, AGCO has declined -1.00%, versus a 14.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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