World food prices rose for the eighth consecutive month in January. The FAO Food Price Index averaged 113.3 points in January 2021, registering its highest monthly average since July 2014. With crop supplies dwindling and the side effects of COVID-19 pandemic-related monetary policy easing, farm commodity prices are likely to continue rising in the coming months…
Consequently, the agricultural sector has been garnering a lot of investor attention lately. Thanks to a combination of increased demand from areas experiencing economic recovery, a weaker dollar, poor weather and disrupted global supply chains, the optimism surrounding food prices is not likely to diminish anytime soon.
This, we think, should bode well for Archer-Daniels-Midland Company (ADM – Get Rating) and Nutrien Ltd. (NTR – Get Rating), which deliver agricultural products. With crop prices on the upswing, these stocks should generate substantial returns in the near term.
Headquartered in Chicago, Illinois, ADM procures, processes, and merchandises agricultural commodities, products, and ingredients in the United States and internationally. It operates through Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition segments and is also engaged in the agricultural commodity and feed product import, export, and distribution.
In December, ADM announced that it will end production of dry lysine in the first half of this year to focus solely on meeting customer needs for liquid and encapsulated lysine products. The company’s investment in cutting-edge ingredients and services should help it strengthen its business portfolio significantly
In November, ADM announced plans to collaborate with InnovaFeed on the construction and operation of the world’s largest insect protein production site in Decatur, Illinois. This project should help ADM meet fast growing demand for insect feed in the U.S. and worldwide and take the next steps to innovate and grow its business.
ADM’s operating profit has increased 21.9% year-over-year to $1.14 billion in the fourth quarter ended December 31, 2020. Its gross profit grew 15.7% from its year-ago value to $1.35 billion, while its net income increased 36.3% year-over-year to $687 million. Its EPS rose 35.6% from the prior-year quarter to $1.22.
A consensus EPS estimate of $1.02 for the current quarter, ending March 30, 2021, represents a 59.4% improvement year-over-year. Also, ADM beat the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $16.32 billion for the current quarter represents a 9% increase from the same period last year. The stock has gained 41.9% over the past year.
ADM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ADM has a B grade for Value, Stability, and Momentum. Within the C-rated Agriculture industry, it is ranked #4 of 32 stocks.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the ADM ratings for Quality, Growth, and Sentiment.
Incorporated in 2017, NTR offers crop inputs, services, and financial solutions worldwide. The company also distributes crop nutrients, crop protection products, seeds, and merchandise products through approximately 2,000 retail locations in the United States, Canada, South America, and Australia.
Last month, the Toronto Stock Exchange accepted NTR’s notice of repurchase of…
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