Amidst the ongoing global population growth, the unwavering demand for agricultural products persists. Given the industry’s resilient nature, in this piece, I have discussed the fundamentals of three agricultural stocks: Cronos Group Inc. (CRON), The Mosaic Company (MOS), and Dole plc (DOLE).
After assessing these stocks, DOLE appears to be a strong investment candidate, while MOS is worth keeping an eye on for a more opportune entry point. However, steering clear of CRON for the time being could be wise.
Beyond its social and developmental importance, agriculture plays a crucial role in propelling global economic growth. It accounts for around 4% of the worldwide Gross Domestic Product (GDP), and in certain less developed nations, its contribution can surpass 25% of GDP. This underscores the significant economic influence and importance of the agricultural sector on both a global and regional level.
Furthermore, agricultural development is a key tool to end extreme poverty, promote shared prosperity, and nourish an expected 10 billion people by 2050. The sector's growth is two to four times more effective in increasing incomes for the poorest compared to other sectors.
Given the sector's importance, it's no surprise that governments worldwide are heavily investing to improve efficiency and cut costs. A notable example is the Biden-Harris Administration's allocation of $266 million to support rural business owners, farmers, and ranchers in lowering energy expenses, generating income, and expanding operations.
In addition to solid governmental backing, the industry prospects are further bolstered by the use of smart technology. For instance, agricultural robots are employed to automate various farming tasks such as soil maintenance, fruit picking, weeding, planting, harvesting, plowing, and irrigation.
Additionally, sensors for infrastructural health are utilized to monitor material conditions and vibrations in factories, farms, and other infrastructure. The global smart agriculture market size is projected to grow at an impressive 13.4% CAGR from 2023 to 2030.
Thus, keeping the industry’s crucial role in sustaining global food production and economic development in mind, let us dig deeper into the fundamentals of the featured Agriculture stocks, beginning with number three:
Stock #3: Cronos Group Inc. (CRON)
Based in Toronto, Canada, CRON operates as a cannabinoid company. It manufactures, markets, and distributes hemp-derived supplements and cosmetic products through e-commerce, retail, and hospitality partner channels under the Lord Jones brand in the United States.
In terms of the trailing-12-month gross profit margin, CRON’s 8.61% is 84.7% lower than the 56.39% industry average. Its trailing-12-month negative EBIT margin of 110.75% compares to the 0.77% industry average. Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.08x is 80.7% lower than the 0.39x industry average.
For the fiscal third quarter, which ended on September 30, 2023, CRON’s operating loss amounted to $21.78 million, while its attributable net loss and comprehensive loss came in at $1.64 million and $21.82 million, respectively.
Moreover, during the same period, the company’s cash and cash equivalents stood at $571.66 million, declining 25.2% compared to $764.64 million as of December 31, 2022. Also, CRON’s adjusted EBITDA loss amounted to $15.19 million.
The consensus revenue estimate of $87.91 million for the fiscal year ending December 2023 reflects a 4.1% decrease year-over-year. The consensus EPS estimate for the same period is expected to come in at a negative $0.10.
CRON’s shares have plummeted 35.3% over the past year to close the last trading session at $1.96.
CRON’s grim fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Momentum and a D for Value, Stability, and Quality. In the 26-stock Agriculture industry, it is ranked #18. Click here to see CRON’s ratings for Growth and Sentiment.
Stock #2: The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients in North America and internationally. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes.
On October 18, MOS declared a quarterly dividend of $0.20 per share, payable to its shareholders on December 21, 2023.
The company’s annual dividend of $0.80 translates to a 2.21% yield on the prevailing prices, while its four-year average dividend yield is 1.23%. Its dividend payouts have grown at a CAGR of 55.4% and 49.6% over the past three and five years, respectively.
MOS’ trailing-12-month levered FCF margin of 9.78% is 138.1% higher than the 4.11% industry average. However, its 17.57% trailing-12-month gross profit margin is 38.2% lower than the 28.43% industry average. Additionally, the stock’s trailing-12-month asset turnover ratio of 0.65x is 7.4% lower than the 0.70x industry average.
In the fiscal third quarter, which ended on September 30, 2023, MOS’ net sales and operating earnings amounted to $3.55 billion and $145.80 million, respectively. However, its net loss came in at $4.20 million versus net earnings of $841.70 million in the prior-year quarter.
Meanwhile, during the same period, the company’s total current liabilities stood at $4.69 billion, declining 15.1% compared to $5.53 billion as of December 31, 2022.
Analysts expect the company’s revenue and EPS for the fourth quarter (ending December 2023) to be $3.26 billion and $0.95, respectively.
Moreover, the company surpassed its revenue estimates in each of the trailing four quarters, which is promising. In contrast, the company has a disappointing earnings surprise history, failing to surpass the EPS estimates in each of the trailing four quarters.
MOS’ shares have plunged 27.8% over the past year but gained 10.1% over the past month to close the last trading session at $36.42.
MOS’ POWR Ratings are consistent with this uncertain outlook. It has an overall rating of C, translating to Neutral in our proprietary rating system.
It is ranked #15 out of 26 stocks in the same industry. It has a C grade for Quality. Click here to see MOS’ ratings for Growth, Value, Momentum, Stability, and Sentiment.
Stock #1: Dole plc (DOLE)
Headquartered in Dublin, Ireland, DOLE engages in 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 October 2, DOLE officially introduced its new specialist division, Dole Organics, and the consumer brand 'GO Organic!'. Dole Organics aims to invigorate the organic fresh produce category by fostering collaboration across sectors, consolidating the supply chain, ensuring product continuity and consistency, and implementing top-notch category management practices in stores.
Simultaneously, the 'GO Organic!' brand emphasizes a diverse selection of organic fresh produce, further enhancing DOLE’s already successful presence with its offerings of DOLE® Organic bananas and pineapples in Europe.
In terms of the trailing-12-month asset turnover ratio, DOLE’s 2.08x is 146.9% higher than the 0.84x industry average. Furthermore, the stock’s trailing-12-month cash per share of $2.29 is 34.4% higher than the $1.70 industry average.
For the fiscal third quarter, which ended on September 30, 2023, DOLE’s revenue increased 4.2% year-over-year to $2.04 billion, while its operating income rose 166.9% from the year-ago value to $77.10 million.
The company’s attributable net income amounted to $45.29 million and $0.48 million, up 13.7% and 14.3% from the prior-year quarter, respectively. In addition, DOLE’s adjusted EBITDA improved 7.6% year-over-year to $85.20 million.
Street expects DOLE’s revenue for the fourth quarter (ending December 2023) to be $2.17 billion. Meanwhile, its consensus EPS estimate of $0.10 for the same quarter reflects a 14.8% year-over-year improvement. Additionally, the company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing four quarters.
The stock has surged 19.5% year-to-date to close the last trading session at $11.53.
Unsurprisingly, DOLE has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Growth. Out of 26 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have DOLE’s ratings for Momentum, Stability, Sentiment, and Quality. Get all DOLE ratings here.
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MOS shares were trading at $35.77 per share on Thursday afternoon, down $0.65 (-1.78%). Year-to-date, MOS has declined -16.36%, versus a 19.94% 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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