Amid favorable government support and a stable demand for agricultural goods, the industry is anticipated to remain resilient. Given this backdrop, investors could buy fundamentally strong agricultural technology stocks ICL Group Ltd (ICL), Adecoagro S.A. (AGRO), and Dole plc (DOLE), which are currently trading at discounted valuations.
A country's economy is often underpinned by its agriculture sector, which has not been immune to challenges over recent years. This sector was squeezed by high inflation, further complicated by geopolitical disturbances, resulting in supply chain disruptions and escalated food prices. Furthermore, the sky-high costs of fertilizers and other farming necessities have left agriculturalists in an unstable economic state.
However, considering the sector’s importance, there is ample investment flowing into agriculture worldwide by the government, aiming to enhance efficiency and reduce expenses. For instance, the Biden-Harris Administration’s allocation of $266 million to aid rural entrepreneurs, farmers, and ranchers to lower their energy expenditure, increase revenue, and enlarge their operations. Also, the USDA has announced a sum of $72.9 million in grant funding to augment the specialty crops industry through the Specialty Crop Block Grant Program.
Accompanying these efforts, the introduction and advancement of advanced technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), Blockchain, and Machine Learning (ML) to the realm of agriculture are providing enormous growth and development possibilities globally for the smart agriculture market and vertical farming.
Consequently, the global agriculture market is expected to grow to $19.29 trillion in 2028 at a CAGR of 7.7%.
Considering these conducive trends, let's take a look at the fundamentals of the top three Agriculture stocks, starting with number 3.
Stock #3: 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, ICL acquired Nitro 1000, a manufacturer, developer and provider of biologicals in Brazil, for approximately $30 million. This acquisition marks another meaningful step into the biologicals market while expanding ICL’s product offerings and positioning the company for further expansion into new and adjacent end markets.
ICL’s Board of Directors declared a dividend of 4.76 cents per share, or approximately $61 million. The dividend will be paid on March 26. It pays an annual dividend of $0.19 per share, which translates to a dividend yield of 3.54% on the current share price.
Its four-year average yield is 6.20%. ICL’s dividend payments have grown at CAGRs of 58.7% and 14.4% over the past three and five years, respectively.
In terms of forward Price/Book, ICL is trading at 1.17x, 35.5% lower than the industry average of 1.82x. The stock’s forward EV/EBIT multiple of 9.52 is 25.7% lower than the industry average of 12.82.
ICL’s trailing-12-month cash from operations of $1.60 billion is 253.4% higher than the industry average of $451.33 million. Its trailing-12-month net income and levered FCF margins of 8.59% and 8.22% are 67.3% and 72.2% higher than the industry averages of 5.13% and 4.77%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, ICL’s sales and adjusted operating income stood at $1.69 billion and $211 million, respectively. Moreover, its total adjusted EBITDA stood at $357 million.
For the same quarter, its adjusted net income attributable to the company’s shareholders and adjusted earnings per share stood at $123 million and $0.10, respectively.
Street expects ICL’s revenue and EPS for the fiscal first quarter ending March 2024 to be $1.89 billion and $0.07, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 7.4% year-to-date to close the last trading session at $5.38. Over the past month, it has gained 15.7%.
ICL’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, 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.
The stock has a B grade for Value, Stability, and Quality. It is ranked #3 out of 24 stocks within the Agriculture industry.
Click here for the additional POWR Ratings for ICL (Growth, Momentum, and Sentiment).
Stock #2: Adecoagro S.A. (AGRO)
Headquartered in Luxembourg, AGRO operates as an agro-industrial company in South America. The company mainly operates through three segments: Farming; Sugar, Ethanol and Energy; and Land Transformation.
On November 24, 2023, AGRO made its second cash dividend payment of $17.50 million (approximately $0.16 per share) to shareholders of the company. It pays an annual dividend of $0.33 per share, which translates to a dividend yield of 3.25% on the current share price. Its four-year average yield is 1.35%.
Share repurchase during the first ten months of 2023 amounted to 2.60 million shares (2.40% of AGRO's equity) at an average price of $9.45 per share, totaling $24.30 million.
In terms of forward Price/Book, AGRO is trading at 0.91x, 70.5% lower than the industry average of 3.07x. The stock’s forward EV/EBIT multiple of 8.58 is 41.5% lower than the industry average of 14.67.
AGRO’s trailing-12-month CAPEX/Sales of 16.41% is 391.3% higher than the industry average of 3.34%. Its trailing-12-month EBITDA and levered FCF margins of 30.86% and 12.64% are 162.7% and 147.2% higher than the industry averages of 11.74% and 5.11%, respectively.
For the fiscal third quarter that ended September 30, 2023, AGRO’s gross sales and adjusted EBIT stood at $387.95 million and $87.95 million, up 1.6% and 37.8% year-over-year, respectively. Moreover, its adjusted EBITDA increased 27% from the prior-year quarter to $155.30 million.
For the same quarter, its adjusted net income and adjusted net income per share stood at $88.56 million and $0.83, up 87.6% and 92.5% from the year-ago quarter, respectively.
Street expects AGRO’s revenue and EPS for the fiscal year ending December 2024 to increase 5.7% and 2.5% year-over-year to $1.46 billion and $1.32, respectively. The company surpassed consensus revenue estimates in each of the trailing four quarters.
The stock has gained 23.7% over the past year to close the last trading session at $10.08. Over the past nine months, it has gained 15.2%.
AGRO’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
AGRO has a B grade for Value and Sentiment. Within the same industry, it is ranked #2.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Quality. Get all ratings of AGRO 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 four segments: Fresh Fruit; Diversified Fresh Produce - EMEA; Diversified Fresh Produce - Americas and ROW; and Fresh Vegetables.
On February 28, DOLE’s Board of Directors declared a cash dividend for the fourth quarter of 2023 of $0.08 per share, payable to shareholders on April 4. It pays an annual dividend of $0.32 per share, which translates to a dividend yield of 2.74% on the current share price. Its four-year average yield is 2.07%.
In terms of forward Price/Sales, DOLE is trading at 0.13x, 89.5% lower than the industry average of 1.22x. The stock’s forward EV/Sales multiple of 0.28 is 83.5% lower than the industry average of 1.70.
DOLE’s trailing-12-month asset turnover ratio of 1.80x is 115.6% higher than the industry average of 0.84x, while its trailing-12-month cash per share of $2.90 is 58.8% higher than the industry average of $1.83.
For the fiscal fourth quarter that ended December 31, 2023, DOLE’s net revenues increased 1.5% year-over-year to $2.07 billion, while adjusted EBIT increased marginally from the year-ago quarter to $47.33 million. Moreover, its adjusted EBITDA stood at $76.86 million.
For the same quarter, its adjusted net income for adjusted EPS calculation and adjusted earnings per share stood at $14.83 million and $0.16, respectively.
Street expects DOLE’s revenue for the fiscal first quarter ending March 2024 to increase 8.2% year-over-year to $2.14 billion. Its EPS is expected to be $0.31 for the same quarter. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 2% over the past month to close the last trading session at $11.69.
DOLE’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
DOLE has an A grade for Growth and Value. Within the same industry, it is ranked first.
To see additional POWR Ratings for Momentum, Stability, Sentiment, and Quality for DOLE, click here.
What To Do Next?
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ICL shares fell $0.08 (-1.49%) in premarket trading Monday. Year-to-date, ICL has gained 7.39%, versus a 7.90% 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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