Agriculture is crucial for global sustainability, food security, natural resource conservation, climate change mitigation, and rural livelihoods. With an uptick in sustainable practices amid favorable technological growth and a stable demand for agricultural goods, the industry is poised for steady growth.
Amid this backdrop, investors could consider buying fundamentally strong agriculture stocks such as Nutrien Ltd. (NTR), ICL Group Ltd (ICL), and Dole plc (DOLE), for a sustainable future. Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the agriculture industry’s prospects.
The agriculture industry plays a vital role in global sustainability by ensuring food security, preserving natural resources, and supporting rural economies. Sustainable agricultural practices help increase crop yields, reduce food waste, and improve resilience to climate change, ultimately benefiting the environment and food security. However, rising inflation and geopolitical disturbances have led to supply chain disruptions and increased food prices.
According to a report by the World Business Council for Sustainable Development, the Food and Land Use Coalition, and We Mean Business, implementing sustainable practices like regenerative farming in food and agriculture could reduce 50% of greenhouse gas emissions by 2030, minimizing the negative impacts of farming on plant life, wildlife, and freshwater sources. By adopting these measures, the industry has potential to make significant strides towards a more sustainable and eco-friendly food system.
Accompanying these efforts, the introduction and advancement of technologies such as the Internet of Things (IoT), artificial intelligence, blockchain, and machine learning to the realm of agriculture are providing enormous growth and development possibilities globally for the smart agriculture market and vertical farming. Furthermore, the global agriculture market is estimated to reach $19.29 trillion in 2028 at a CAGR of 7.7%.
Considering these conducive trends, let’s examine the fundamentals of the three Agriculture stock picks, beginning with the third choice.
Stock #3: Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR provides crop inputs and services. The company operates through four segments: Retail, Potash, Nitrogen, and Phosphate.
NTR’s trailing-12-month CAPEX/Sales of 8.71% is 13.9% higher than the industry average of 7.65%. Its trailing-12-month EBITDA margin and levered FCF margin of 18.08% and 7.58% are 10.2% and 44.4% higher than the industry averages of 16.41% and 5.25%, respectively.
NTR’s sales for the fiscal first quarter that ended March 31, 2024, amounted to $5.39 billion. Its adjusted EBITDA came to $1.06 billion. Moreover, its gross margin amounted to $1.54 billion. The company’s adjusted net earnings stood at $230 million and $0.46 per share, respectively.
For the quarter ending September 30, 2024, NTR’s revenue is expected to increase marginally year-over-year to $5.42 billion. Its EPS for the same quarter is expected to rise 72.1% year-over-year to $0.60. The stock has declined 3.5% over the past three months to close the last trading session at $51.22.
NTR’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
NTR has a B grade for Growth and Value. It is ranked #4 out of 27 stocks in the Agriculture industry. Click here to see NTR’s Momentum, Stability, Sentiment, and Quality ratings.
Stock #2: ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL operates as a specialty minerals and chemicals company worldwide. It operates in four segments: Industrial Products, Potash, Phosphate Solutions, and Growing Solutions.
On February 28, 2024, ICL acquired Nitro 1000, a manufacturer, developer and provider of biologicals in Brazil for approximately $30 million. This acquisition marked another meaningful step into the biologicals market, while expanding ICL’s product offerings and positioning the company for further expansions into new and adjacent end-markets.
ICL’s trailing-12-month gross profit margin of 33.29% is 18% higher than the industry average of 28.22%. Likewise, its trailing-12-month Return on Common Equity and Return on Total Assets of 8.36% and 4.14% are 42.5% and 58.3% higher than the industry averages of 5.87% and 2.62%, respectively.
For the fiscal first quarter that ended March 31, 2024, ICL’s sales and adjusted operating income stood at $1.74 billion and $215 million, respectively. Its adjusted EBITDA stood at $362 million. For the same quarter, its adjusted net income attributable to shareholders and adjusted earnings per share came in at $118 million and $0.09, respectively.
Street expects ICL’s fiscal 2025 EPS, to increase 26.8% year-over-year to $0.45. Its revenue for the quarter ending December 31, 2024, is expected to increase 13.3% year-over-year to $1.91 billion. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive. ICL has declined 5.7% over the past month, closing the last trading session at $4.51.
ICL’s strong fundamentals are reflected in its POWR Ratings. It 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 Stability, Sentiment, and Quality. It is ranked #2 in the same industry. Get ICL’s Growth and Momentum ratings here.
Stock #1: Dole plc (DOLE)
Headquartered in Dublin, Ireland, DOLE sources, processes, markets, and distributes fresh fruit and vegetables worldwide. The company operates through three segments: Fresh Fruit, Diversified Fresh Produce - EMEA, Diversified Fresh Produce - Americas and ROW.
DOLE’s trailing-12-month asset turnover ratio of 1.83x is 118% higher than the industry average of 0.84x. Similarly, its trailing-12-month Return on Common Equity of 15.64% is 40.8% higher than the industry average of 11.10%.
DOLE’s net revenues for the fiscal first quarter that ended March 31, 2024, stood at $2.12 billion, up 6.6% over the prior-year quarter. Its adjusted EBITDA increased 9.7% year-over-year to $110.10 million. In addition, its adjusted net income rose 25.6% from the year-ago quarter to $40.55 million. Also, its adjusted earnings per share grew 26.5% year-over-year to $0.43.
Analysts expect DOLE’s fiscal 2025 revenue and EPS to increase 1.7% and 18.2% year-over-year to $8.33 billion and $1.39, respectively. The company surpassed the Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 2.2%, closing the last trading session at $11.86.
DOLE’s POWR Ratings reflect its robust prospects. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
DOLE has an A grade for Value and a B for Stability and Quality. Within the Agriculture industry, it is ranked first. Click here for the additional POWR Ratings of DOLE (Growth, Momentum, and Sentiment).
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NTR shares were trading at $50.59 per share on Monday afternoon, down $0.63 (-1.23%). Year-to-date, NTR has declined -8.33%, versus a 15.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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