Volatilities associated with the current macroeconomic environment and fears of an impending recession could remain anchored for quite some time. However, amid favorable government assistance and the stable demand for agricultural products, the industry is poised to stay resilient in the upcoming months. Given this backdrop, let us explore agricultural stocks Archer-Daniels-Midland Company (ADM), ICL Group Ltd (ICL), and Dole plc (DOLE).
Agriculture is the beating heart of an economy. However, like many other industries, the agriculture sector faced challenges last year. High inflation and geopolitical turmoil had put significant pressure on the industry, with resultant supply chain issues and high food prices. In addition, high fertilizer and other input costs left farmers in a precarious economic situation.
However, to increase American-made fertilizer production, USDA announced the first $29 million in grant offers, which would also give U.S. farmers more choices and fairer prices. Also, other government efforts to ensure secure and sustainable domestic agricultural production are expected to benefit the industry.
Moreover, due to the reopening of the Chinese economy, the agriculture industry is projected to register a strong year, which should bode well for farmers, chemical suppliers, and grain traders.
Also, the application of advanced technology in agriculture could drive the “vertical farming” concept and expand crop productivity, ensuring less use of resources. According to Extrapolate, the global vertical farming market is expected to grow $11.20 billion by 2028 with a CAGR of 25.2% due to technological advancements and the convenience of crop monitoring and harvesting.
Furthermore, the global agriculture market is expected to grow to $19.01 trillion in 2027 at a CAGR of 9.1%. Against this backdrop, it might be wise to add fundamentally strong agriculture stocks ADM, ICL, and DOLE to garner good returns in 2023.
Archer-Daniels-Midland Company (ADM)
ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The company operates through three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.
On March 13, ADM was named in the World’s Most Ethical Companies List for the fourth year in a row by Ethisphere, a global leader in advancing the standards of ethical business practices. Also, in February, for the 15th consecutive year, ADM was recognized as the world’s most admired company in the food production industry by FORTUNE Magazine.
This reflects the company’s excellent performance and sustained commitment amid a challenging global environment.
Recently, ADM’s board of directors declared a dividend of 45 cents per share on the company’s common stock, paid to shareholders on March 2, 2023. This was ADM’s 365th consecutive quarterly payment. The company has a record of 91 years of uninterrupted dividends.
ADM pays a $1.80 per share dividend annually, which translates to a 2.34% yield on the current price level. Its four-year average dividend yield is 2.68%. Its dividend payouts have grown at 5.4% and 5% CAGRs over the past three and five years, respectively.
ADM’s revenue grew at CAGRs of 16.2% and 10.8% over the past three and five years, respectively. Likewise, its EBITDA and EBIT grew at a CAGR of 26.9% and 38.7% over the past three years, respectively.
For the fiscal fourth quarter that ended December 31, 2022, ADM’s revenues increased 13.6% year-over-year to $26.23 billion. Its gross profit rose 6.8% from the year-ago value to $1.76 billion. Its adjusted net earnings increased 25.8% year-over-year to $1.07 billion. Additionally, its adjusted EPS came in at $1.93, representing a 28.7% increase from the prior-year quarter.
ADM’s revenue for the fiscal first quarter ending March 2023 is expected to increase 3.8% year-over-year to $24.55 billion. Street expects its EPS to come in at $1.76. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained marginally over the past five days to close the last trading session at $76.97.
ADM’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Sentiment. It is ranked #5 out of 25 stocks in the Agriculture industry.
Click here to see the additional ADM ratings for Value, Momentum, Stability, and Quality.
ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL and its subsidiaries are engaged in the fertilizer and specialty chemical sectors. The company operates in three segments: Fertilizers; Industrial Products; and Performance Products. It executes its sale through marketing companies, agents, and distributors.
On January 19, ICL announced that its AgriFood innovation and investment platform, ICL Planet Startup Hub, had invested €2.75 million ($2.95 million) in Arkeon, GmbH, to develop CO2-derived protein ingredients for food applications.
“Arkeon brings to the table innovative and sustainable technology for use in creating the next generation of alternative protein products. They also fully align with ICL Food Specialties growth strategy of pursuing new frontiers in unique and functional alternative proteins,” said Rado Sporka, vice president of the Food Specialties Commercial Business for ICL.
In the same month, the company signed a strategic partnership agreement with General Mills to supply phosphate solutions in North America with the potential for international expansion. Such collaborations should help expand the company’s footprint, boosting its revenue and overall growth prospects.
ICL paid its shareholders a quarterly dividend of $0.1383 on March 15, 2023. Its annual dividend of $0.91 yields 8.30% on its prevailing prices. Its four-year average dividend yield is 4.53%. Its dividend payouts have grown at 70.8% and 43.8% CAGRs over the past three and five years, respectively.
Its revenue grew at CAGRs of 23.9% and 13.1% over the past three years and five years, respectively. Likewise, its EBITDA and EPS grew at CAGRs of 50.7% and 65.3% over the past three years, respectively.
ICL’s sales increased 2.6% year-over-year to $2.09 billion in the fourth quarter that ended December 31, 2022. Its adjusted operating income grew 22.7% from the year-ago value to $562 million, while its adjusted net income increased 5.6% year-over-year to $358 million. The company’s adjusted EBITDA came in at $698 million, up 18.9% year-over-year. Also, its EPS increased 7.7% from its year-ago value to $0.28.
Analysts expect its EPS and revenue to come in at $0.93 and $8.57 billion for the fiscal year ending December 2023. Additionally, it surpassed EPS estimates in three of the trailing four quarters.
The stock gained marginally over the past five days to close the last trading session at $6.67.
It is no surprise that ICL has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. Within the same Agriculture industry, it is ranked #3.
Click here to get additional POWR Ratings of ICL for Growth, Momentum, Stability, and Sentiment.
Dole plc (DOLE)
DOLE, headquartered in Dublin, Ireland, engages in sourcing, processing, marketing, and distribution of 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 January 31, the company announced the sale of its Fresh Vegetables Division to an affiliate of Fresh Express Incorporated, a wholly owned subsidiary of Chiquita Holdings Limited, for gross proceeds of approximately $293 million. This transaction is expected to strengthen DOLE’s financial position and increase its focus on and investments in its core activities.
On March 6, DOLE declared a dividend of $0.08 per share, payable on April 21, 2023. Its forward annual dividend translates to a 2.79% yield on current prices, while its four-year average dividend yield is 1.73%.
DOLE’s revenue grew at CAGRs of 30.4% and 18.6% over the past three and five years, respectively. Likewise, its EBITDA and EBIT grew at CAGRs of 40.8% and 27.8% over the past three years, respectively.
For the fourth quarter that ended December 31, 2022, DOLE’s revenue rose 4.7% year-over-year to $2.36 billion. Its adjusted EBITDA rose 21.7% year-over-year to $74.39 million. Its adjusted net income increased significantly year-over-year to $8.93 million, while its adjusted EPS came in at $0.09.
DOLE’s revenue is expected to come in at $2.24 billion in the fiscal third quarter ending September 2023. Its EPS is expected to increase 8.3% year-over-year to $0.15 in the same quarter. Additionally, it surpassed EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 19.5% over the past three months to close the last trading session at $11.53. Over the past six months, the stock has gained 44.3%.
DOLE’s promising prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.
DOLE has an A grade for Growth and a B for Value. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated DOLE for Momentum, Stability, Sentiment, and Quality. Get all DOLE ratings here.
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ADM shares were trading at $77.24 per share on Thursday morning, up $0.27 (+0.35%). Year-to-date, ADM has declined -16.36%, versus a 4.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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