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4 Key Agriculture Stocks Positioned for Gains as Market Trends Improve
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The Zacks Agriculture – Operations industry is poised to benefit from innovations and growing consumer demand for healthy products. Positive agricultural export projections for fiscal 2024 support a favorable near-term outlook for the industry. Investments in acquisitions, joint ventures and expansions are expected to further enhance the industry players’ prospects. Continued investments in assets and technology to foster innovation and improve customer service are especially advantageous for companies like Corteva Inc. (CTVA - Free Report) , Dole plc (DOLE - Free Report) , Adecoagro (AGRO - Free Report) and Calavo Growers (CVGW - Free Report) .
However, the industry faces significant challenges that impact productivity, sustainability and the well-being of its participants. Fluctuating commodity prices, rising input costs, trade uncertainties and increasing operational expenses have pressured industry players. With costs climbing across the board, companies in this essential sector are grappling with headwinds, which are affecting their operations, profitability and long-term sustainability.
About the Industry
The Zacks Agriculture – Operations industry comprises companies that produce or procure, transport, store, process and distribute agricultural commodities to consumers. It also distributes ingredients to other parts of the agriculture industry (including clothing, animal feed, energy and industrial products). Some industry players engage in dairy operations, land transformation activities and the development of food ingredients using gene-editing technology. The industry encompasses production activities related to the traditional farming of crops (like corn, soybean, wheat and cotton), and livestock and poultry products (including meat, dairy and eggs). The products are mainly sold at grocery stores or exported overseas. These are also used as feedstock for other industries. For example, cotton is used in the clothing industry and corn is used in the ethanol industry.
Factors Shaping the Future of Agriculture - Operations Industry
Agricultural Export Projections: Per the U.S. Department of Agriculture, the agricultural export projection for fiscal 2025 (ending Sept. 30, 2025) of $169.5 billion marks a decline of $4 billion from the revised fiscal 2024 forecast. The fiscal 2025 decline was due to expectations of reduced unit values of soybeans, corn, and cotton, and lower beef volume. Soybean exports are projected to decrease by $1.5 billion to $22.9 billion, and corn exports are expected to drop $900 million to $12.2 billion as declines in unit values outweigh increased volumes for both crops. Cotton exports are forecast to fall $900 million to $4.5 billion due to weakening unit values, with volumes remaining steady. Beef exports are projected at $8.4 billion, suggesting a $1-billion decrease from fiscal 2024, as reduced U.S. production limits exportable supply.
Organic Products & Innovation in Focus: The industry has benefited from the growing consumer demand for healthier food, driving a shift toward organic production techniques, and reducing the use of chemicals and pesticides among agriculturists. Innovations in food processing, better grain-handling methods, increased storage capacity and strong emerging market demand are supporting industry growth. As healthy eating habits rise, the consumption of alternative proteins is expected to increase. Industry players are focusing on improving productivity and innovation, aligning their efforts with trends in food security, health and well-being. Companies are also investing in acquisitions and joint ventures to develop high-quality ingredients and solutions to meet the demand for healthy products.
Elevated Costs: Industry participants are witnessing higher costs, driven by fluctuating commodity prices, inflation-related input cost increases and trade uncertainties. All these factors are impacting agricultural companies' profitability. The surge in input costs due to inflation is one of the most immediate challenges, significantly raising production costs and squeezing profit margins. To mitigate rising raw material costs, companies have implemented pricing strategies. Additionally, industry players are addressing global supply-chain challenges through partnerships and distribution strategies. However, despite these efforts, commodity cost inflation is expected to continue pressuring margins and profitability in the near term.
Companies in the industry are also dealing with increased SG&A expenses due to higher performance-related compensation, project costs, commissions and variable compensation. Investments in technology and innovation to maintain competitiveness are also contributing to elevated operating expenses. The ongoing deleverage in SG&A expenses may continue to impact profitability.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Agriculture – Operations industry is a 13-stock group within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #86, which places it in the top 35% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries resulted from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually gaining confidence in this group’s earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
In a year, the Zacks Agriculture – Operations industry has underperformed the S&P 500 and the Zacks Consumer Staples sector.
The stocks in the industry have collectively fallen 8.4% in a year against growth of 5.8% for the sector and 33.8% for the Zacks S&P 500 composite.
One-Year Price Performance
Agriculture - Operations Industry's Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing Consumer Staples stocks, the agriculture – Operations industry is currently trading at 12.41X compared with the S&P 500’s 22.7X and the sector’s 17.33X.
Over the last five years, the industry traded as high as 17.3X, as low as 10.9X and at the median of 14.24X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Agriculture Operations Stocks to Keep an Eye on
One stock in the Zacks Agriculture – Operations universe currently sports a Zacks Rank #1 (Strong Buy), whereas none have a Zacks Rank #2 (Buy). Thus, we have suggested three stocks with a Zacks Rank #3 (Hold) from the same industry, which investors may hold on to. You can see the complete list of today’s Zacks #1 Rank stocks here.
Calavo Growers: This Santa Paula, CA-based company is a global leader in the avocado industry and a growing provider of value-added fresh foods. It sources and markets a variety of fresh produce, including tomatoes and tropical fruits, under the Calavo brand, proprietary sub-brands, private labels and store brands. The company serves retail grocers, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide.
The Zacks Consensus Estimate for CVGW’s fiscal 2024 earnings has moved up 13.9% in the past seven days. The Zacks Consensus Estimate for its fiscal 2024 earnings suggests substantial growth from the loss per share of 1 cent reported in the year-ago period. The Zacks Rank #1 company delivered a negative earnings surprise of 32.8%, on average, in the trailing four quarters. The CVGW stock has rallied 14.1% in the past year.
Price and Consensus: CVGW
Corteva: This Wilmington, DE-based pure-play agriculture company is poised to drive above-market growth through its industry-leading product pipeline, and rigorous approach to innovation and operating discipline. It is poised to accelerate its pace of innovation and existing leadership position in the high-value sector to meet the increasing market demand for naturally derived products through three new collaboration agreements. Strong price execution in seed, supply-chain flexibility and solid market demand for its balanced and differentiated new product portfolios drive CTVA’s performance.
The Zacks Consensus Estimate for Corteva’s 2024 earnings has moved down 2.3% in the past seven days. The Zacks Consensus Estimate for its 2024 sales and earnings suggests declines of 1.4% and 3.4%, respectively, from the year-ago period’s reported figures. The Zacks Rank #3 company has delivered an earnings surprise of 27.4%, on average, in the trailing four quarters. The CTVA stock has risen 23.4% in the past year.
Price and Consensus: CTVA
Dole: This Dublin, Ireland-based global leader in fresh produce is poised to benefit from improved logistical efficiencies in several areas, which brought increased stability to its core fruit business. The company’s diverse sourcing network and advanced farming practices are likely to help overcome the weather challenges in various regions. The company benefited from a healthier supply and demand balance, which allowed for a better pricing environment in Europe and much-improved selling conditions in the non-core markets.
The Zacks Consensus Estimate for Dole’s 2024 earnings has been unchanged in the past 30 days. The Zacks Consensus Estimate for its 2024 sales suggests growth of 0.5% from the year-ago period’s reported figure. The Zacks Rank #3 company delivered an earnings surprise of 152.4%, on average, in the trailing four quarters. The DOLE stock has rallied 40.8% in the past year.
Price and Consensus: DOLE
Adecoagro: This Luxembourg-based agro-industrial company engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. The company benefits from high asset flexibility, which gives it a competitive advantage in the current uncertain market outlook. Its flexibility is reflected in its ability to increase the mix of anhydrous ethanol to benefit from its high prices and recovering demand. The company’s Farming and Land Transformation businesses have been benefiting from consolidating the five-year plan investments made in Crops, Rice and Dairy businesses, along with its focus on efficiencies.
The Zacks Rank #3 company’s shares have risen 10% in the past year. The Zacks Consensus Estimate for AGRO’s 2024 earnings has moved down 6.5% in the past 30 days. The Zacks Consensus Estimate for the company’s 2024 sales and EPS suggests growth of 12.5% and 8.3%, respectively, from the year-ago period’s reported figures.
Price and Consensus: AGRO
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4 Key Agriculture Stocks Positioned for Gains as Market Trends Improve
The Zacks Agriculture – Operations industry is poised to benefit from innovations and growing consumer demand for healthy products. Positive agricultural export projections for fiscal 2024 support a favorable near-term outlook for the industry. Investments in acquisitions, joint ventures and expansions are expected to further enhance the industry players’ prospects. Continued investments in assets and technology to foster innovation and improve customer service are especially advantageous for companies like Corteva Inc. (CTVA - Free Report) , Dole plc (DOLE - Free Report) , Adecoagro (AGRO - Free Report) and Calavo Growers (CVGW - Free Report) .
However, the industry faces significant challenges that impact productivity, sustainability and the well-being of its participants. Fluctuating commodity prices, rising input costs, trade uncertainties and increasing operational expenses have pressured industry players. With costs climbing across the board, companies in this essential sector are grappling with headwinds, which are affecting their operations, profitability and long-term sustainability.
About the Industry
The Zacks Agriculture – Operations industry comprises companies that produce or procure, transport, store, process and distribute agricultural commodities to consumers. It also distributes ingredients to other parts of the agriculture industry (including clothing, animal feed, energy and industrial products). Some industry players engage in dairy operations, land transformation activities and the development of food ingredients using gene-editing technology. The industry encompasses production activities related to the traditional farming of crops (like corn, soybean, wheat and cotton), and livestock and poultry products (including meat, dairy and eggs). The products are mainly sold at grocery stores or exported overseas. These are also used as feedstock for other industries. For example, cotton is used in the clothing industry and corn is used in the ethanol industry.
Factors Shaping the Future of Agriculture - Operations Industry
Agricultural Export Projections: Per the U.S. Department of Agriculture, the agricultural export projection for fiscal 2025 (ending Sept. 30, 2025) of $169.5 billion marks a decline of $4 billion from the revised fiscal 2024 forecast. The fiscal 2025 decline was due to expectations of reduced unit values of soybeans, corn, and cotton, and lower beef volume. Soybean exports are projected to decrease by $1.5 billion to $22.9 billion, and corn exports are expected to drop $900 million to $12.2 billion as declines in unit values outweigh increased volumes for both crops. Cotton exports are forecast to fall $900 million to $4.5 billion due to weakening unit values, with volumes remaining steady. Beef exports are projected at $8.4 billion, suggesting a $1-billion decrease from fiscal 2024, as reduced U.S. production limits exportable supply.
Organic Products & Innovation in Focus: The industry has benefited from the growing consumer demand for healthier food, driving a shift toward organic production techniques, and reducing the use of chemicals and pesticides among agriculturists. Innovations in food processing, better grain-handling methods, increased storage capacity and strong emerging market demand are supporting industry growth. As healthy eating habits rise, the consumption of alternative proteins is expected to increase. Industry players are focusing on improving productivity and innovation, aligning their efforts with trends in food security, health and well-being. Companies are also investing in acquisitions and joint ventures to develop high-quality ingredients and solutions to meet the demand for healthy products.
Elevated Costs: Industry participants are witnessing higher costs, driven by fluctuating commodity prices, inflation-related input cost increases and trade uncertainties. All these factors are impacting agricultural companies' profitability. The surge in input costs due to inflation is one of the most immediate challenges, significantly raising production costs and squeezing profit margins. To mitigate rising raw material costs, companies have implemented pricing strategies. Additionally, industry players are addressing global supply-chain challenges through partnerships and distribution strategies. However, despite these efforts, commodity cost inflation is expected to continue pressuring margins and profitability in the near term.
Companies in the industry are also dealing with increased SG&A expenses due to higher performance-related compensation, project costs, commissions and variable compensation. Investments in technology and innovation to maintain competitiveness are also contributing to elevated operating expenses. The ongoing deleverage in SG&A expenses may continue to impact profitability.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Agriculture – Operations industry is a 13-stock group within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #86, which places it in the top 35% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries resulted from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually gaining confidence in this group’s earnings growth potential.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
In a year, the Zacks Agriculture – Operations industry has underperformed the S&P 500 and the Zacks Consumer Staples sector.
The stocks in the industry have collectively fallen 8.4% in a year against growth of 5.8% for the sector and 33.8% for the Zacks S&P 500 composite.
One-Year Price Performance
Agriculture - Operations Industry's Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing Consumer Staples stocks, the agriculture – Operations industry is currently trading at 12.41X compared with the S&P 500’s 22.7X and the sector’s 17.33X.
Over the last five years, the industry traded as high as 17.3X, as low as 10.9X and at the median of 14.24X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Agriculture Operations Stocks to Keep an Eye on
One stock in the Zacks Agriculture – Operations universe currently sports a Zacks Rank #1 (Strong Buy), whereas none have a Zacks Rank #2 (Buy). Thus, we have suggested three stocks with a Zacks Rank #3 (Hold) from the same industry, which investors may hold on to. You can see the complete list of today’s Zacks #1 Rank stocks here.
Calavo Growers: This Santa Paula, CA-based company is a global leader in the avocado industry and a growing provider of value-added fresh foods. It sources and markets a variety of fresh produce, including tomatoes and tropical fruits, under the Calavo brand, proprietary sub-brands, private labels and store brands. The company serves retail grocers, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide.
The Zacks Consensus Estimate for CVGW’s fiscal 2024 earnings has moved up 13.9% in the past seven days. The Zacks Consensus Estimate for its fiscal 2024 earnings suggests substantial growth from the loss per share of 1 cent reported in the year-ago period. The Zacks Rank #1 company delivered a negative earnings surprise of 32.8%, on average, in the trailing four quarters. The CVGW stock has rallied 14.1% in the past year.
Price and Consensus: CVGW
Corteva: This Wilmington, DE-based pure-play agriculture company is poised to drive above-market growth through its industry-leading product pipeline, and rigorous approach to innovation and operating discipline. It is poised to accelerate its pace of innovation and existing leadership position in the high-value sector to meet the increasing market demand for naturally derived products through three new collaboration agreements. Strong price execution in seed, supply-chain flexibility and solid market demand for its balanced and differentiated new product portfolios drive CTVA’s performance.
The Zacks Consensus Estimate for Corteva’s 2024 earnings has moved down 2.3% in the past seven days. The Zacks Consensus Estimate for its 2024 sales and earnings suggests declines of 1.4% and 3.4%, respectively, from the year-ago period’s reported figures. The Zacks Rank #3 company has delivered an earnings surprise of 27.4%, on average, in the trailing four quarters. The CTVA stock has risen 23.4% in the past year.
Price and Consensus: CTVA
Dole: This Dublin, Ireland-based global leader in fresh produce is poised to benefit from improved logistical efficiencies in several areas, which brought increased stability to its core fruit business. The company’s diverse sourcing network and advanced farming practices are likely to help overcome the weather challenges in various regions. The company benefited from a healthier supply and demand balance, which allowed for a better pricing environment in Europe and much-improved selling conditions in the non-core markets.
The Zacks Consensus Estimate for Dole’s 2024 earnings has been unchanged in the past 30 days. The Zacks Consensus Estimate for its 2024 sales suggests growth of 0.5% from the year-ago period’s reported figure. The Zacks Rank #3 company delivered an earnings surprise of 152.4%, on average, in the trailing four quarters. The DOLE stock has rallied 40.8% in the past year.
Price and Consensus: DOLE
Adecoagro: This Luxembourg-based agro-industrial company engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. The company benefits from high asset flexibility, which gives it a competitive advantage in the current uncertain market outlook. Its flexibility is reflected in its ability to increase the mix of anhydrous ethanol to benefit from its high prices and recovering demand. The company’s Farming and Land Transformation businesses have been benefiting from consolidating the five-year plan investments made in Crops, Rice and Dairy businesses, along with its focus on efficiencies.
The Zacks Rank #3 company’s shares have risen 10% in the past year. The Zacks Consensus Estimate for AGRO’s 2024 earnings has moved down 6.5% in the past 30 days. The Zacks Consensus Estimate for the company’s 2024 sales and EPS suggests growth of 12.5% and 8.3%, respectively, from the year-ago period’s reported figures.
Price and Consensus: AGRO