Certain agriculture stocks may experience growth this summer as the sector stabilizes following years of disruptions and benefits from emerging factors. Agriculture will also likely be at the forefront of addressing climate change challenges, creating investment opportunities in supply sectors as investors will consider which agriculture stocks to buy.
The sector had not managed to recover from the pandemic before being hit by the war in Ukraine. High fuel and input costs, coupled with consumer inflation, hurt profitability. Then, rising interest rates made equipment financing more difficult, weighing on farm suppliers. Now that supply chains have adjusted to the Ukraine situation and monetary policy is anticipated to ease, some investors may be more inclined to investigate which agriculture stocks to buy.
Moreover, the U.S. Department of Agriculture expects a strong harvest this year, which could help farmers invest in new machinery. Meanwhile, production strains from weather events are pressuring global output. This may sustain high demand for U.S. agriculture through the remainder of 2024.
Given these positive industry trends, some agriculture stocks with potential for growth for the rest of the year and potentially beyond include:
Agco (AGCO)
Agco (NYSE:AGCO) is one of the three agriculture stocks to consider buying before they sprout. The Georgia-based machinery supplier could provide solid growth in 2024 due to its focus on precision agriculture, which is expected to see increasing demand as consumers solicit more sustainable farming.
The company welcomed Parallel Ag’s merger with A.C. McCartney Equipment, which allows ACGO to provide its entire lineup of products across Illinois, Kansas, Oklahoma and Texas. With interest rates expected to come down in the coming months, farmers may invest larger crop returns to update their machinery.
Agco stock is down over 14% year-to-date (YTD) after seasonally lower winter earnings. This has left the stock, with a price-to-earnings (P/E) ratio of just 7.1x, well below the sector average of 13.1x. Moreover, its share price recently departed its 52-week low of $102.76, with the upper band at $140 per share. Analysts are also optimistic about the ACGO stock, with an average price target of $133.36 offering a potential upside of almost 30%.
Mosaic (MOS)
Farmers rely primarily on fertilizers to produce large agricultural yields. After harvesting crops, fertilizers replenish the soil for future seasons. With forecasts of abundant harvests this year and constrained fertilizer supplies due to sanctions, agricultural stocks focused on phosphates and potash could see a significant upside. Mosaic (NYSE:MOS) is one of the agriculture stocks to consider buying.
Despite its first-quarter results showing a revenue decline, earnings exceeded estimates, with sales up 16% year-over-year (YOY). This revealed that management rationalized costs amid anticipated strong demand and tight market conditions this year. The company also noted the transition to La Nina may boost sales, provided growers restore soil following years of slow fertilization.
With a twelve-month forward P/E ratio of 12.6x compared to the S&P 500 average of 27.4x, MOS stock presents a favorable risk-reward profile among agriculture stocks to buy. Analysts recognize Mosaic as particularly well-positioned, forecasting its average price target has nearly 20% growth over current levels. The company also pays a dividend yield of 2.75%.
Bunge Limited (BG)
The agribusiness and food ingredients processing company Bunge (NYSE:BG) may benefit from improvements in the food sector. Easing inflation could also boost demand for consumer food products, making it a prime candidate as one of the agriculture stocks worth buying. It is also attractive because the BG stock performed well after an intended merger with Viterra, 50% held by Glencore (OTCMKTS:GLNCY), trading 6% higher YTD. This is despite competition concerns from Canadian authorities causing struggles. If resolved, BG stock could grow again.
Despite missing expectations with a decline in net income and EPS compared to the prior year, the company repurchased $400 million in shares during the quarter. Nonetheless, Bunge beat analyst EPS estimates for the fourth time in a row, with ten analysts estimating an average EPS of $9.13 in 2024. The company maintained its full-year adjusted EPS outlook of around $9.00.
Bunge trades at a PE ratio of 8.6x, lower than the food and beverages sector average. Analysts remain optimistic, with an average price target of $116.24 per share, signaling an 8% upside potential.
On the date of publication, Stavros Tousios 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.
