Agriculture stocks have a place in every investor's portfolio. The fact is that the byproduct of agriculture literally feeds the world. But for a variety of reasons, supply and/or demand can be disrupted. For example, the weather is often a concern. Farmers are always subject to periods of drought or flooding.
But the past few years have shown how this sector is not immune from geopolitical concerns. The Covid-19 pandemic affected supply chains on top of seeing demand destruction in key markets. And this year, the world is seeing how interconnected we've become. Russia's war on Ukraine is shutting in a large percentage of the world's wheat supply.
However, with commodity prices soaring in several categories, investors have an opportunity in agriculture technology stocks. These companies run the gamut from companies that provide equipment to those that provide fertilizer, pesticides, and other products and services.
To help investors determine if this opportunity is right for them, we've created this special presentation. We assess the long-term opportunity for seven agricultural technology stocks.
Quick Links
- Archer-Daniels Midland
- Deere & Co.
- Nutrien
- Agco
- Bunge
- Scotts Miracle-Gro
- Corteva
#1 - Archer-Daniels Midland (NYSE:ADM)
The first agricultural technology stock on our list is the definition of a pandemic winner. Archer-Daniels Midland (NYSE:ADM) stock is up 149% since its pandemic low in March 2020. And the company has at least two key catalysts that could push the stock higher.
First, the company is involved in the development of alternative proteins. The plant-based food movement is becoming big business and the company has undertaken a $300 million expansion of its Decatur, Illinois plant to meet this growing demand. Second, the company will be a key link in the supply chain to transport higher ethanol blends of gasoline in the summer to help ease pricing pressure.
The stock currently has a price-to-earnings (P/E) ratio of 15.43 which is below the sector average. And even though both earnings and revenue are forecast to peak in 2022 and decline in subsequent years. Both metrics will remain above pre-pandemic levels. Plus, the company offers a solid annual dividend of $1.60 that it has been increasing for the last 49 years.
About Archer-Daniels-Midland
Archer-Daniels-Midland Company engages in the procurement, transportation, storage, processing, and merchandising of agricultural commodities, ingredients, flavors, and solutions in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. It operates in three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition.
Read More - Current Price
- $53.53
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 13 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $62.83 (17.4% Upside)
#2 - Deere & Co. (NYSE:DE)
The next stock on our list is Deere & Company (NYSE:DE). The company has some exposure to Russia which caused the stock to drop at the immediate onset of the war. However, DE stock quickly jumped as high as 30%. And a pullback of 16% may be giving investors a second bite at this stock.
The bullish case for Deere is that their signature green and yellow equipment are no longer just beasts of burden. The products feature advanced technologies and features that are helping to enhance productivity and sustainability. And as demand for food and efficient water use remains elevated, Deere will have a long runway for growth. This may be a key reason that analysts tracked by MarketBeat give DE stock a 21% upside.
The stock itself has an attractive valuation and the company is projected to grow both revenue and earnings over the next five years. Deere also has an attractive dividend that currently pays out $4.20 annually.
About Deere & Company
Deere & Company engages in the manufacture and distribution of various equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. The Production and Precision Agriculture segment provides large and medium tractors, combines, cotton pickers and strippers, sugarcane harvesters and loaders, harvesting front-end equipment, pull-behind scrapers, and tillage and seeding equipment, as well as application equipment, including sprayers and nutrient management, and soil preparation machinery for grain growers.
Read More - Current Price
- $405.11
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 12 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $420.69 (3.8% Upside)
#3 - Nutrien (NYSE:NTR)
Nutrien (NYSE:NTR) is a shining star in a volatile market. While many blue-chip stocks are underwater this year, NTR stock is up 26%. And that’s even after experiencing a 16% dip since hitting its all-time high in April. Analysts are projecting high single-digit growth for the Canadian-based company. But should investors buy-in?
Your answer may depend on what you believe about the need for fertilizer. The company is one of the leading agrochemical producers. Specifically, the company manufactures two core elements (potash and nitrogen) that are required in fertilizers. In its last earnings report, the company raised its guidance for potash production by 5%.
Fertilizer prices are at all-time highs and will likely to remain that way for the remainder of this year. That suggests that now is a good time to buy and hold NTR stock which looks undervalued at its current price and is showing solid growth in free cash flow (FCF).
About Nutrien
Nutrien Ltd. provides crop inputs and services. The company operates through four segments: Retail, Potash, Nitrogen, and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seeds, and merchandise products. The Potash segment provides granular and standard potash products.
Read More - Current Price
- $45.91
- Consensus Rating
- Hold
- Ratings Breakdown
- 10 Buy Ratings, 6 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $60.33 (31.4% Upside)
#4 - Agco (NYSE:AGCO)
Next on this list of agriculture technology stocks is Agco (NYSE:AGCO) which is another play on agriculture equipment. At one point this year, AGCO was up 28%. It’s since given back those gains and is essentially at a break-even point as of this writing.
The company saw a surge in sales as farmers raced to order equipment to take advantage of rising commodity prices by boosting their production. The company projects this demand will remain solid throughout the year. In fact, it is forecasting $12.3 billion in sales which would be a 10% year-over-year (YOY) increase. The company also has pricing power which is expected to be evident in YOY earnings growth of 11%.
And like many stocks on this list, AGCO has an attractive valuation with a P/E ratio that is currently below 10 (9.93). Analysts give the stock a 27% upside which can help make up for the company’s dividend which is reliable, but not spectacular.
About AGCO
AGCO Corporation manufactures and distributes agricultural equipment and related replacement parts worldwide. It offers horsepower tractors for row crop production, soil cultivation, planting, land leveling, seeding, and commercial hay operations; utility tractors for small- and medium-sized farms, as well as for dairy, livestock, orchards, and vineyards; and compact tractors for small farms, specialty agricultural industries, landscaping, equestrian, and residential uses.
Read More - Current Price
- $92.03
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $114.40 (24.3% Upside)
#5 - Bunge (NYSE:BG)
The supply and demand dynamic for wheat are one of the more compelling reasons for investors to consider Bunge (NYSE:BG) stock. The company is involved in storing, transporting, and processing commodities, notably wheat. It also supplies milled wheat to a variety of commercial businesses including food service firms, brewers, and bakeries. As Melissa Brock wrote for MarketBeat, the company’s various business segments “provide the backbone for many items that end up on grocery store shelves.” The company has its own storage facilities and has a tight supply that should support elevated prices.
BG stock is up 15% for the year and that’s down from the 35% gain it was posted earlier this year. A P/E ratio of 8.5 combined with a low beta of 0.49 suggests that investors are not undertaking a lot of risks. Earnings and revenue are projected to remain well above pre-pandemic levels for the next few years. That could be enough to improve the company’s free cash flow situation.
About Bunge Global
Bunge Global SA operates as an agribusiness and food company worldwide. It operates through four segments: Agribusiness, Refined and Specialty Oils, Milling, and Sugar and Bioenergy. The Agribusiness segment purchases, stores, transports, processes, and sells agricultural commodities and commodity products, including oilseeds primarily soybeans, rapeseed, canola, and sunflower seeds, as well as grains comprising wheat and corn; and processes oilseeds into vegetable oils and protein meals.
Read More - Current Price
- $88.08
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $118.00 (34.0% Upside)
#6 - Scotts Miracle-Gro (NYSE:SMG)
Unlike many of the stocks on this list, Scotts Miracle-Gro (NYSE:SMG) is down for the year. In fact, it’s down 40% as of this writing. Part of the reason for this is that Scotts is a peripheral player in the cannabis trade and that market continues to struggle.
But that’s the glass-half-empty view. On the glass-half-full side, the company’s core business should be an attractive catalyst for revenue and earnings. And if that narrative plays out, investors may begin to take a closer look at a stock that is looking oversold. That seems to be the case with institutional investors who have been buying SMG stock in the last two quarters.
Scotts has an attractive valuation and is projecting solid earnings and revenue growth over the next five years. That may be why analysts suggest that SMG stock has a 74% upside. The company has also increased its dividend in each of the last 13 years.
About Scotts Miracle-Gro
The Scotts Miracle-Gro Company, together with its subsidiaries, manufactures, markets, and sells products for lawn, garden care, and indoor and hydroponic gardening in the United States and internationally. It operates through three segments: U.S. Consumer, Hawthorne, and Other. The company provides lawn care products, comprising lawn fertilizers, grass seed products, spreaders, and other durable products, as well as lawn-related weed, pest, and disease control products; and gardening and landscape products, which include water-soluble and continuous-release plant foods, potting mixes, garden soils, mulches and ground cover products, plant-related pest and disease control products, organic garden products, and live goods and seeding solutions.
Read More - Current Price
- $75.18
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $78.60 (4.5% Upside)
#7 - Corteva (NYSE:CTVA)
The last agriculture technology stock on our list is Corteva (NYSE:CTVA). Corteva is a company in the emerging agriscience sector. If you’re not familiar with it, you may be familiar with Dupont de Nemours (NYSE:DD). Corteva was the latter company’s agricultural unit before being spun off in 2019. The company is has a comprehensive portfolio of products including digital solutions that are helping their customers protect their crops and generate higher yields.
Unlike many stocks in this presentation, CTVA stock does look slightly overvalued right now. However, the company is posting YOY growth in revenue and earnings, and both numbers are expected to continue to rise in the next five years.
Analysts give the stock an 11% upside from its current price. And although the company has only been trading publicly for a few years, it has already started to increase its dividend.
About Corteva
Corteva, Inc operates in the agriculture business. It operates through two segments, Seed and Crop Protection. The Seed segment develops and supplies advanced germplasm and traits that produce optimum yield for farms. It offers trait technologies that enhance resistance to weather, disease, insects, and herbicides used to control weeds, as well as food and nutritional characteristics.
Read More - Current Price
- $58.77
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $63.89 (8.7% Upside)
As you can see, the agriculture technology sector is diverse. If you're more comfortable buying into funds at this time, there are several options available. One of the largest exchange-traded funds that specializes in agriculture is the iShares MSCI Agriculture Producers ETF (NYSEARCA:VEGI). Recently shares were trading at an all-time high.
Agriculture technology stocks give investors an opportunity to buy companies that offer stable earnings, healthy cash flow and, in many cases, dividends. These aren't going to be the superstars of your portfolio in terms of growth. However, this recent correction may be allowing investors to recalibrate their growth expectations.
This is likely to bring quality dividend stocks back in fashion. Over time, these stocks help to smooth out the volatility in your portfolio.
And if you're looking for another reason to buy agriculture stocks, consider that they are among the ultimate consumer staples. There will always be demand for their products and services. Even if you're not actively buying, these stocks merit consideration for your watch list.
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