Mosaic vs. Corteva: Which Agricultural Stock is a Better Buy?

Corteva, Inc. (CTVA) and Mosaic Co. (MOS) are two prominent players in the global agricultural inputs industry. CTVA is an agricultural chemical company that operates through two segments ─ Seed and Crop Protection. The company develops and supplies advanced germplasm and trait technologies that improve resistance to weather, disease, insects, and herbicides used to control weeds, enhance food and nutritional characteristics, and help produce optimum yield. On the other hand, MOS produces and markets concentrated phosphate and potash crop nutrients. The company operates through three segments ─ Phosphates, Potash, and Mosaic Fertilizantes. It also provides nitrogen-based crop nutrients, animal feed ingredients, and other ancillary services.

The United States is witnessing decade-high food prices owing to high inflation, rising energy and commodity prices, and global supply chain constraints. Nevertheless, increasing consumer spending this festive season has been surging the demand for fertilizers and crop nutrients to produce better crop quality and yield, driving its prices. To overcome these issues, some countries have stopped exporting their crop nutrients to support their domestic availability.

However, falling natural gas prices (a key ingredient in making nitrogen-based fertilizers) and technological integration in seed sciences to produce genetically modified seeds should help companies produce better crop yields, promote sustainable agriculture, and witness good sales in the upcoming months. So, both CTVA and MOS should benefit.

While MOS lost 4% over the past month, CTVA has risen marginally. But which of these stocks is a better pick now? Let us find out.

Latest Developments

On December 7, 2021, CTVA’s Corteva Agriscience subsidiary announced that Serbia had approved the registration of a Univoq fungicide with CTVA’s Inatreq active, a new fungicide that helps in controlling Septoria, the biggest disease affecting wheat yields. It uses the patented iQ-4 formulation, which delivers improved performance and empowers Univoq fungicide to stick to and spread across the leaf. Available for sale in 2022, CTVA is looking forward to witnessing great demand from farmers and helping increase yield sustainably.

In its October 2021 sales report, sales from MOS’ Phosphates segment increased 48.6% year-over-year to $437 million, sales from its Potash segment increased 43.3% year-over-year to $258 million, and sales from its Mosaic Fertilizantes segment increased 84.5% year-over-year to $500 million. MOS is forecasting strong demand and sales in the upcoming months.

Recent Financial Results

CTVA’s net sales for the third quarter, ended September 30, 2021, increased 27.3% year-over-year to $2.37 billion. The company’s non-GAAP loss from operations came in at $169 million, indicating a 44.3% decline from the year-ago period. CTVA’s non-GAAP net loss came in at $100 million, indicating a 66% rise from the year-ago period. Its non-GAAP loss per share decreased 64.1% year-over-year to $0.14. As of September 30, 2021, the company had $2.78 billion in cash and cash equivalents.

For the fiscal third quarter ended September 30, 2021, MOS’ net sales increased 43.5% year-over-year to $3.42 billion. The company’s gross profit came in at $864.50 million, representing a 143.5% rise from the prior-year period. Its operating earnings came in at $701.60 million, up 612.3% from the prior-year period. MOS’ net income came in at $371.90 million for the quarter, compared to a loss of $6.2 million in the prior-year period. Its adjusted EPS increased 487% to $1.35. The company had $842.80 million in cash as of September 30, 2021.

Past and Expected Financial Performance

CTVA’s revenue and total assets have grown at CAGRs of 2.5% and 22.1%, respectively, over the past three years. Analysts expect CTVA’s EPS to grow 42.7% year-over-year in the current year and 21.5% next year. Its revenue is expected to improve 9.9% in the current year and 6.5% next year. Its EPS is expected to grow at a rate of 24.9% per annum over the next five years.

In comparison, MOS’s revenue and total assets grew at CAGRs of 6.2% and 2.1%, respectively, over the past three years. MOS’s EPS is expected to increase 510.6% year-over-year in the current year and 27.6% next year. The stock’s revenue is expected to grow 42.5% year-over-year in the current year and 14.1% next year. MOS’s EPS is estimated to grow at a 7% rate per annum over the next five years.  

Valuation

In terms of forward EV/Sales, CTVA is currently trading at 2.19x, which is 62.2% higher than MOS’ 1.51x. In terms of trailing-12-month Price-to-Book, MOS’ 1.31x compares with CTVA’s 1.41x.

Profitability

CTVA’s trailing-12-month revenue is almost 1.4 times MOS’. CTVA is more profitable, with a 40.8% gross profit margin versus MOS’ 22.7%.

Furthermore, CTVA’s levered free cash flow margin of 12.7% compares favorably with MOS’ 4.5%.

POWR Ratings

While CTVA has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, MOS has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.  

Both CTVA and MOS have a B grade for Momentum, owing to the impressive price gains over the past year. CTVA has delivered 9% price returns over the past three months, while MOS surged 15.7% over the past three months.

CTVA has a B grade for Sentiment, consistent with optimistic analyst estimates. CTVA’s EPS is expected to grow at a 24.9% rate per annum over the next five years. MOS’ C grade for Sentiment is in sync with its relatively lower earnings growth. Analysts expect MOS’ EPS to increase at a rate of 7% per annum over the next five years.

Of the 30 stocks in the Agriculture industry, CTVA is ranked #6, while MOS is ranked #13.

Beyond what we have stated above, our POWR Ratings system has also rated CTVA and MOS for Growth, Stability, Value, and Quality. Get all CTVA ratings here. Also, click here to see the additional POWR Ratings for MOS.

The Winner

The growing demand for quality crop nutrients and seed-applied technologies should substantially benefit both MOS and CTVA in the long term. However, higher profit margins make CTVA a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Agriculture industry.

MOS shares were trading at $35.78 per share on Thursday afternoon, down $0.24 (-0.67%). Year-to-date, MOS has gained 56.77%, versus a 26.48% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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