The agriculture industry is booming so far in 2022, thanks to soaring food prices triggered by the Russia-Ukraine war. Russia and Ukraine are two of the world’s largest agricultural producers, and the ongoing war in Ukraine, and economic sanctions on Russia, have disrupted food production, causing a reduction in supply globally. The two countries account for approximately 30% of wheat exports and 18% of corn exports globally. The heightened supply chain disruptions have caused a supply-demand imbalance for agricultural commodities, driving some food commodity prices up.
Amid the constrained global supplies due, wheat prices have surged 37%, and corn prices have surged 21% so far in 2022. This has resulted in a solid upswing in agriculture stocks. Investors’ bullish sentiment surrounding the sector is evident in the iShares MSCI Global Agriculture Producers ETF’s (VEGI) 19.2% gains over the past year.
Given the significant spike in food prices, we think it advisable to invest in fundamentally solid agriculture stocks Bunge Limited (BG), AGCO Corporation (AGCO), and Sprouts Farmers Market, Inc. (SFM).
Bunge Limited (BG)
BG is an agribusiness and food company that operates in the U.S. and internationally. The White Plains, N.Y., company operates through four segments: Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy. BG provides agricultural commodity products, packaged and bulk oils and fats, sugar and ethanol, and corn milling products.
On March 19, BG announced the conversion of all issued and outstanding shares of its 4.9% preferred shares into common shares of the company, a par value of $0.01 per share. This conversion reflects BG’s strong share price performance in recent months and further strengthens the company's capital structure.
In its fiscal 2021 fourth quarter, ended Dec. 31, 2021, BG's net sales increased 30.4% year-over-year to $12.32 billion. Its gross profit grew 5.5% year-over-year to $616 million. The company’s adjusted total segment EBIT improved 16.6% from the prior-year period to $680 million. And its adjusted net income per common share rose 14.4% year-over-year to $3.49.
The $14.22 billion consensus revenue estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents 9.7% year-over-year growth from the same period in 2021. BG has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of BG have increased 17.5% in price year-to-date and 19.2% over the past three months. It closed yesterday's trading session at $109.71.
BG's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has a B grade for Growth and Value. Within the Agriculture industry, it is ranked #9 of 30 stocks.
To see additional POWR Ratings (Quality, Momentum, Stability, and Sentiment) for BG, click here.
AGCO Corporation (AGCO)
AGCO manufactures and distributes agricultural equipment and solutions worldwide. The Duluth, Ga., company provides horsepower tractors, compact tractors, drying equipment systems, seed-processing systems, and broiler production equipment. In addition, AGCO offers balers, loader wagons, forage harvesters, tedders for harvesting and packaging vegetative feeds. It markets its products under the Fendt, GSI, Challenger, and Valtra brands.
Last December, AGCO agreed to acquire Appareo Systems, LLC, a leader in software engineering, hardware development, and electronic manufacturing. “The addition of Appareo enhances our portfolio and talent as we execute our strategy to provide advanced technology solutions to farmers around the world,” stated Eric Hansotia, AGCO’s chairman, president, and CEO.
AGCO's net sales increased 16.1% year-over-year to $3.16 billion in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. AGCO’s income from operations improved 48.3% year-over-year to $264 million. Its net income grew 109.2% year-over-year to $283.30 million. Its net income attributable to AGCO shareholders increased 108.3% from the year-ago value to $282.10 million, and its net income per common share attributable to AGCO rose 110.7% year-over-year to $3.75.
Analysts expect AGCO's revenue for its fiscal year 2022 first quarter, ending March 31, 2022, to come in at $2.65 billion, representing an 11.6% rise year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
AGCO gained 25.1% in price year-to-date and 26.5% over the past three months to close yesterday's trading session at $145.14.
AGCO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a grade of A for Value. Within the Agriculture industry, it is ranked #8 of 30 stocks.
To see additional component grades for AGCO (Momentum, Quality, Stability, Growth, and Sentiment), click here.
Sprouts Farmers Market, Inc. (SFM)
SFM provides fresh, natural, and organic food products in the U.S. The Phoenix, Ariz.-based company offers a wide range of perishable product categories, including fresh produce, seafood, meat, floral, dairy; and non-perishable product categories, such as grocery, frozen foods, beer and wine, vitamins and supplements, and natural health and body care. SFM operates more than 374 stores in 23 states in the U.S.
In March, SFM closed a $700 million credit facility. The new facility is to refinance its $700 million revolving credit facility, which was repaid and terminated. The new facility will allow SFM to fund operations and unit growth through strong cash flow generation. It is expected to provide SFM with greater financial flexibility.
In its fiscal year 2021, ended Jan. 2, 2022, SFM's cash and cash equivalents increased 44.5% year-over-year to $245.29 million. The company’s total current assets grew 21.8% from the previous year to come in at $567.72 million.
The $1.65 billion consensus revenue estimate for its fiscal 2022 first quarter, ending March 31, 2022, represents 4.5% year-over-year growth. The $0.72 consensus EPS estimate for the current quarter indicates a 3% year-over-year rise from its year-ago value. SFM has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
SFM stock price has improved 21% over the past year and closed yesterday's trading session at $31.98.
SFM’s POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
SFM has an A grade for Quality. It is ranked #29 of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Click here to see SFM’s POWR Ratings for Momentum, Value, Sentiment, Growth, and Stability.
BG shares were trading at $111.87 per share on Thursday afternoon, up $2.16 (+1.97%). Year-to-date, BG has gained 20.45%, versus a -3.65% 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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