Having largely emerged from the global crisis that was COVID-19, investors might now need to consider ag stocks to mitigate the impact of another brewing calamity: the ongoing disruption in the broader food supply chain. With Russia’s invasion of Ukraine showing no signs of abating, the two major food and food-commodities producers are locked into a bleak environment.
To be fair, some evidence indicates that the world dodged a bullet during the first year of Russia’s invasion. Back then, anxious analysts projected skyrocketing prices and the worsening of global hunger. Of course, a negative impact materialized but the events did not reach projected worst-case scenarios. Still, investors should keep a close eye on viable agriculture stocks to buy.
Because tensions only seem to be flaring not just in Ukraine but also in other regions, competition for critical resources will almost surely accelerate. Cynically, then, the below ag stocks may jump higher on growth and profitability dynamics.
Bunge (BG)
An agribusiness and food company, Bunge (NYSE:BG) represents a powerhouse among ag stocks. According to its public profile, Bunge operates as an international soybean exporter. It also engages in food processing, grain trading, and fertilizer management. Operating in 40 countries, the enterprise features a massive footprint. Despite shocks to the system, BG is in positive territory for the year.
Financially, the company offers an attractive profile. In fairness, Bunge’s trailing 12-month (TTM) revenue comes in at $61.26 billion, down from the $67.2 billion posted in 2022. However, it’s also important to note that TTM gross margin jumped to 7.2% from 2022’s 5.48%. Also, despite the sales hit, net income (TTM) is $1.96 billion, up from last year’s haul of $1.61 billion.
Notably, BG trades at 8.22x forward earnings, lower than the sector median of 14.47x. As a bonus, Bunge offers a forward yield of 2.51% with an ultra-low payout ratio of 22.62%. Analysts rate BG a moderate buy with a $126.33 target, projecting nearly 20% growth.
Archer Daniels Midland (ADM)
A multinational food processing and commodities trading firm, Archer Daniels Midland (NYSE:ADM) represents one of the biggest ag stocks in the equities space. Per its public profile, Archer Daniels Midland operates hundreds of plants and crop procurement facilities across the world. At these locations, the company processes cereal grains and oilseeds, which are eventually integrated into various products.
Unfortunately, circumstances have not been too kind to ADM. Against both a year-to-date and trailing-year framework, shares find themselves printing ample red ink. At the same time, an argument can be made that ADM is now oversold. Looking at its financials, shares trade at only 10.45x forward earnings, favorably below 73% of sector rivals.
Despite its hiccups in the market and its diminished revenue growth on a TTM basis, Archer Daniels is consistently profitable. Also, ADM features a forward yield of 2.57%, leveraging 50 years of consecutive dividend increases. Lastly, analysts peg ADM as a moderate buy with a $92.38 target. That makes it an attractive candidate for agriculture stocks to buy.
Nutrien (NTR)
A Canadian fertilizer company, Nutrien (NYSE:NTR) is the largest producer of potash and the third largest producer of nitrogen fertilizer in the world. Thus, it’s an indelible part of publicly traded ag stocks. Per its public profile, Nutrien commands over 2,000 retail locations across North America, South America and Australia. Still, severe geopolitical uncertainties have pressured NTR this year.
Since the spring doldrums of 2020, NTR had been steadily marching higher. When Russia first invaded Ukraine, investors responded by bidding NTR dramatically higher. However, as the global market began acclimating to the new order – and as the earlier mentioned worst-case scenario failed to materialize – NTR began fading out of the picture.
However, I believe that NTR has now entered undersold territory. For example, shares now trade at only 8x trailing earnings. In contrast, the sector median clocks in at 16.15x. In fairness, Nutrien’s operational stats have taken a hit this year. Nevertheless, it’s still consistently profitable. As well, the company offers a forward yield of 3.82%.
Finally, analysts rate NTR a moderate buy with a $77 target, representing another tempting idea for agriculture stocks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.