As the Russia-Ukraine war continues, fertilizer prices have reached record highs due to supply cuts, helping fertilizer companies expand their profit margins. The cost of food in the United States increased 8.8% in March 2022, according to the U.S. Bureau of Labor Statistics. As a result, fertilizer stocks are also gaining investor attention. This is partly evident from the Invesco DB Agriculture Fund’s (DBA) 10.1% gains over the past three months compared to the SPDR S&P 500 Trust ETF’s (SPY) 4% loss.
As supply disruptions and high fuel costs are expected to keep driving food prices in the near term, the fertilizer industry is expected to keep thriving. According to The Expresswire report, the fertilizer market is expected to grow at a CAGR of 3.1% by 2026.
Given this backdrop, it could be wise to buy Nutrien Ltd. (NTR), AGCO Corporation (AGCO), and The Mosaic Company (MOS), on their recent dip.
Nutrien Ltd. (NTR)
NTR provides crop inputs and services. It offers potash, nitrogen, phosphate, and sulfate products. The company also distributes crop nutrients, crop protection products, seeds, and merchandise products through approximately 2,000 retail locations in the United States, Canada, South America, and Australia.
On March 16, 2022, NTR announced that in response to the uncertainty of potash supply from Eastern Europe, it plans to increase potash production capability to approximately 15 million tonnes in 2022. Ken Seitz, NTR’s Interim President and CEO said, “We continue to closely monitor market conditions and will evolve our long-term plans to ensure we utilize our assets in a safe and sustainable manner that benefits all our stakeholders."
NTR’s revenue increased 79% year-over-year to $7.27 billion in the fourth quarter, which ended December 31, 2021. The company’s adjusted EBITDA grew 221% year-over-year to $2.46 billion, while its net earnings came in at $1.21 billion, representing a 282% year-over-year increase. Also, its adjusted EPS came in at $2.47, up 929% year-over-year.
Analysts expect NTR’s EPS and revenue to increase 127% and 36% year-over-year to $14.14 and $36.53 billion, respectively, in fiscal 2022. The stock has gained 79.7% over the past year to close yesterday’s trading session at $98.94.
NTR’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth and Sentiment, and a B grade for Quality. Within the Agriculture industry, NTR is ranked #2 out of 32 stocks.
To see the additional POWR Ratings for NTR (Stability, Momentum, and Value), click here.
AGCO Corporation (AGCO)
AGCO manufactures and distributes agricultural equipment and related replacement parts worldwide. It offers horsepower, utility, and compact tractors. The company also provides grain storage bins and related drying and handling equipment systems, seed-processing systems, and swine and poultry feed storage and delivery.
On February 8, 2022, Eric Hansotia, AGCO’s Chairman, President and CEO, said, “We are forecasting sales growth and margin expansion in 2022 as industry demand trends positively and our farmer-first strategy gains traction."
AGCO’s revenue increased 16.1% year-over-year to $3.16 billion in the fourth quarter, which ended December 31, 2021. The company’s operating income grew 48.3% year-over-year to $264 million, while its net income came in at $283.30 million, representing a 109.2% year-over-year increase. Also, its EPS came in at $3.75, up 110.7% year-over-year.
Analysts expect AGCO’s EPS to increase 11.4% year-over-year to $11.56 in fiscal 2022. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. Its revenue is expected to be $3.17 billion for the quarter ending June 30, 2022, representing a 15.9% year-over-year rise. The stock surged 5.3% over the past three months to close yesterday’s trading session at $124.55.
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 an A grade for Value.
We also have graded AGCO for Growth, Stability, Quality, Momentum, and Sentiment. Click here to access all of AGCO’s ratings. AGCO is ranked #8 out of 32 stocks in the same industry.
Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients internationally. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes. It owns and operates mines, which produce concentrated phosphate crop nutrients, such as diammonium phosphate, monoammonium phosphate, and ammoniated phosphate products.
On February 24, 2022, MOS announced entering into an accelerated share repurchase agreement with Goldman Sachs & Co. LLC (GS) to repurchase $400 million of its common stock. The final settlement of the ASR is expected to be completed in the second quarter of 2022.
MOS’ net sales increased 56.3% year-over-year to $3.84 billion in the fourth quarter, which ended December 31, 2021. The company’s operating earnings grew 228.9% year-over-year to $969.70 million, while its total assets came in at $22.04 billion, representing an 11.4% year-over-year increase. Also, its adjusted EPS came in at $1.95, up 242.1% year-over-year.
For the current quarter ending June 30, 2022, analysts expect MOS’ EPS and revenue to increase 221.4% and 84.7% year-over-year to $3.76 and $5.17 billion, respectively. The stock has gained 109.7% over the past nine months to close yesterday’s trading session at $63.67.
It’s no surprise that MOS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Growth.
Click here to see MOS’ rating for Value, Momentum, Stability, Sentiment, and Quality as well. MOS is ranked #10 out of 32 stocks in the same industry.
NTR shares were trading at $100.78 per share on Wednesday afternoon, up $1.84 (+1.86%). Year-to-date, NTR has gained 34.65%, versus a -11.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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