AGCO, Sprouts Farmers Market and Bunge
The agricultural industry is booming so far in 2022, thanks to soaring food prices triggered by the Russian-Ukrainian war. Russia and Ukraine are two of the largest agricultural producers in the world, and the ongoing war in Ukraine and economic sanctions against Russia have disrupted food production, leading to a reduction in global supply. The two countries represent about 30% of wheat exports and 18% of world corn exports. Increased supply chain disruptions have caused an imbalance between supply and demand for agricultural products, leading to higher prices for some food items.
Amid tight global supplies, wheat prices have jumped 37% and corn prices jumped 21% so far in 2022. This has resulted in a strong recovery in agricultural inventories. Bullish investor sentiment regarding the sector is evident in iShares MSCI Global Agriculture Producers ETFs (VEGI) 19.2% gains over the past year.
Given the sharp spike in food prices, we believe it is advisable to invest in fundamentally sound agricultural stocks Bunge Limited (BG), AGCO Corporation (AGCO) and Sprouts Farmers Market, Inc. (SFM).
Bunge Limited (BG)
BG is an agribusiness and food company that operates in the United States and internationally. The White Plains, NY Company operates through four segments: Agribusiness; Refined and specialty oils; Milling; and sugar and bioenergy. BG provides agricultural commodities, packaged and bulk oils and fats, sugar and ethanol, and corn milling products.
On March 19, BG announced the conversion of all issued and outstanding shares of its 4.9% preferred stock into common stock of the company, with a par value of $0.01 per share. This conversion reflects BG’s strong share price performance over the past few months and further strengthens the company’s capital structure.
In the fourth quarter of fiscal 2021, ended December 31, 2021, BG net sales grew 30.4% year-over-year to $12.32 billion. Its gross profit rose 5.5% year-over-year to $616 million. The company’s total adjusted segment EBIT improved 16.6% from the prior year period to $680 million. And its adjusted net earnings per common share rose 14.4% year over year to $3.49.
The consensus revenue estimate of $14.22 billion for the first quarter of its fiscal year 2022, ending March 31, 2022, represents 9.7% year-over-year growth over the same period in 2021. BG has exceeded consensus EPS estimates in each of the last four quarters. .
BG shares are up 17.5% year-to-date and 19.2% over the past three months. It closed yesterday’s trading session at $109.71.
BG POWR Rankings reflect this promising prospect. It has an overall rating of B, which is equivalent to Buy in our proprietary rating system. POWR ratings rate stocks on 118 separate factors, each with its own weighting.
The stock has a B rating for growth and value. Within the Agriculture industry, it is ranked #9 out of 30 stocks.
To see additional POWR (Quality, Momentum, Stability, and Sentiment) ratings for BG, Click here.
AGCO Company (AGCO)
AGCO manufactures and distributes agricultural equipment and solutions worldwide. The Duluth, Georgia company provides power tractors, compact tractors, drying equipment systems, seed treatment systems and broiler production equipment. In addition, AGCO offers balers, self-loading trailers, forage harvesters, tedders for harvesting and packing plant foods. It markets its products under the Fendt, GSI, Challenger and Valtra brands.
Last December, AGCO agreed to acquire Appareo Systems, LLC, a leader in software engineering, hardware development and electronics manufacturing. “The addition of Appareo strengthens our portfolio and our talent as we execute our strategy to provide advanced technology solutions to farmers around the world,” said Eric Hansotia, President and CEO of AGCO.
AGCO’s net sales increased 16.1% year-over-year to $3.16 billion in the fourth quarter of fiscal 2021, which ended December 31, 2021. Operating income from ‘AGCO improved 48.3% year over year to $264 million. Its net profit rose 109.2% year-over-year to $283.30 million. Its net income attributable to AGCO shareholders increased 108.3% over the prior year value to $282.10 million, and its net income per common share attributable to AGCO increased by $110.7 % year over year at $3.75.
Analysts expect AGCO’s revenue for the first quarter of its fiscal year 2022, ending March 31, 2022, to be $2.65 billion, an increase of 11.6% from one year to the next. The company has an impressive track record of earnings surprises; it has exceeded consensus EPS estimates in each of the past four quarters.
AGCO has gained 25.1% in price year-to-date and 26.5% over the past three months to close yesterday’s trading session at $145.14.
AGCO’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
It has an A rating for value. Within the agriculture industry, it is ranked #8 out of 30 stocks.
To view additional component grades for AGCO (Momentum, Quality, Stability, Growth, and Sentiment), Click here.
Sprouts Farmers Market, Inc. (SFM)
SFM provides fresh, natural and organic food products in the United States. The Phoenix, Arizona-based company offers a wide range of perishable product categories including fresh produce, seafood, meat, flowers, dairy; and non-perishable product categories, such as groceries, frozen foods, beer and wine, vitamins and supplements, and natural health and body care products. SFM operates over 374 stores in 23 U.S. states
In March, SFM entered into a $700 million credit facility. The new facility is intended to refinance its $700 million revolving credit facility, which was repaid and terminated. The new facility will allow SFM to fund operations and unit growth through strong cash flow generation. It should provide SFM with greater financial flexibility.
In its fiscal year 2021, which ended January 2, 2022, SFM’s cash and cash equivalents increased 44.5% year-over-year to $245.29 million. The company’s total current assets increased 21.8% from the previous year to $567.72 million.
The consensus revenue estimate of $1.65 billion for its fiscal 2022 first quarter, ending March 31, 2022, represents 4.5% year-over-year growth. The consensus EPS estimate of $0.72 for the current quarter indicates a 3% year-over-year increase from its value a year ago. SFM has an impressive history of earnings surprises; it has exceeded consensus EPS estimates in each of the past four quarters.
SFM’s stock price has improved 21% over the past year and closed yesterday’s trading session at $31.98.
SFM’s POWR ratings reflect a strong outlook. The stock has an overall rating of B, which translates to Buy in our POWR rating system.
SFM has an A rating for quality. It is ranked No. 29 out of 39 stocks in the A rating Grocery stores / big box retailers industry.
Click here to see SFM’s POWR Ratings for Momentum, Value, Sentiment, Growth and Stability.
BG shares were trading at $111.87 per share on Thursday afternoon, up $2.16 (+1.97%). Year-to-date, BG has gained 20.45%, versus a -3.65% rise in the benchmark S&P 500 over the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions. Continued…