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Agricultural Chemical Stocks offer investors long-term upside as key stocks in the sector offer exciting 2023 guidance outlooks. They are successfully battling headwinds from worldwide logistics, geo-political issues and heightened raw material costs. These select Companies are instituting new operating efficiencies, cost-cutting strategies and planning expansion into higher growth markets.
These stocks are diamonds in the rough attracting investors with higher dividends, improved multi-year fiscal performance and some are offering attractive share buyback programs.
The pressure is on to grow crops more efficiently to feed everyone globally. The world's population number is approaching eight billion this year. Farmers need to apply agricultural chemicals to fertilizers to improve crop yield and prevent phosphorus and nitrogen runoff and evaporation.
The lingering war in Ukraine has disrupted the global food chain. But management of several agricultural chemical stocks predict the market will reassert itself within the next two harvest cycles. The result for investors is a jump in the global agricultural chemicals market to an estimated $292 billion by 2030, researchers Statista and Next Move Strategy Consulting say.
As an undervalued stock industry, this sector is soaring with growth opportunities.
Zacks: Agricultural Chemical Stocks Bank On Strategic Measures
Among the sector's most promising stocks for investors are Flexible Solutions International (NYSE: FSI), CF Industries Holdings, Inc. (NYSE: CF), Nutrien Ltd. (NYSE: NTR) and The Mosaic Company (NYSE: MOS) . Analyst Zacks tells investors that some of the stocks in the Agricultural Chemicals sector are worth considering ‘for your portfolio'.
Here are some notables:
Zacks Sees FSI As Aggressive In Exploring For New Opportunities
Flexible Solutions International (NYSE: FSI) offers investors who are willing to take a little more risk within the agricultural chemicals sector a special opportunity. FSI is a developer and manufacturer of biodegradable polymers for oil extraction, detergent ingredients, and water treatment, as well as crop nutrient availability chemistry. Analyst Zacks sees it as a Company, particularly its NanoChem Division, as aggressive in exploring for new opportunities in applications such as detergent, water treatment, oil field extraction and agriculture to grow sales and net income.
FSI's net profit was $3.4 million in 2021,16% higher than its $2.9 million in 2020. FSI stock is trading at a PE ratio (TTM) of 9.84.
FSI's volume expanded to $45.7 million in 2022 from $34.4 million in 2021, a 33% jump. In 2020, FSI's volume was $31.4 million, 10% higher than the prior year.
"Considering this, as well as the strength of its earnings outlook, FSI feels like a great value stock right now," concludes analyst firm Z acks . Investor Place lists FSI as one of its ‘hyper-growth stocks with 10x potential in 2023." A Seeking Alpha analyst considers FSI stock a ‘buy,' based on an analysis of multiples and growth over the past five years.
Complete financial results for 2022 will be available on March 31, 2023 concurrent with SEC filings. A conference call will be held on the next business day, Monday, April 3, 2023.
One of FSI's goals is to feed the world's growing population more efficiently. It is doing so profitably and reporting annual sales growth. It is a environmental technology company.
The NanoChem Solutions, Inc. Division of FSI, with proprietary agricultural products EX-10, Sun Savr 30 and Sun 27, are specialty chemicals that successfully commercialize technology. They mitigate nitrogen and phosphorus runoff and evaporation. This means farmers can deliver more efficient production and improved crop yields.
CF Industries Holdings, Inc. Eyes ‘Strong Cash Generation' In Future
CF Industries Holdings, Inc. (NYSE: CF) reported full year 2022 performance net earnings at $3.35 billion on net sales for the full year of $11.19 billion. Adjusted EBITDA was $5.880 billion. In Q4, CF repurchased some 2.2 million of its shares for $223 million. Tony Will, president and CEO of the Company, said, at CF "We believe that the global nitrogen supply-demand balance and global energy cost structure will continue to present attractive margin opportunities for our cost-advantaged network."
As a result, Will predicted ‘strong cash generation' in the years ahead and anticipates seeing strong demand for its low-carbon ammonia. He said ‘substantial capital' would be returned to shareholders. Global nitrogen demand will remain high, he asserted, as the need to replenish stocks will mean continued high prices for corn, wheat and canola. Management estimates it will take two full years of harvests to fully replenish harvest grain stocks. In North America, Will forecasts positive farm economics in 2023. This includes strong crop futures prices and improving yields. In the spring of 2023, 91-93 million acres of corn will be planted, CF forecasts.
At a PE ratio (TTM) of 5.03, CF is trading at what appears to be an undervalued level. According to an analysis by Zacks Equity Research , CF's Q4 per share earnings rise of 33% beat its own Consensus Estimate even as CF's reported sales lagged estimates, it said. However, share prices of CF rose 11.5% in the past year — compared to a 2.6% rise for the industry in this period.
CF's Board has approved a new $3 billion share repurchase program after the current buyback program is completed through 2025, the Company said. CF repurchased 14.9 million shares for $1.35 billion in 2022 and had at the end of 2022 some $150 million remaining for more buybacks through the end of this authorization period through 2024.
NTR Sees 2023 Agricultural Fundamentals Remaining Strong
Nutrien Ltd. (NYSE: NTR) cited geopolitical supply disruption and market volatility across the agriculture, energy and fertilizer markets in reporting its full year 2022 performance results. It particularly noted the impact of the war in Ukraine constricting crop production. It reported net earnings of $7.7 billion on sales of $37.9 billion. Q4 2022 reached $1.1 billion net income on volume of $7.5 billion.
Guidance for 2023 is in an EBITDA range of $8.4 billion-$10 billion with adjusted net earnings per share of $8.45-$10.65. The company said it is basing these guidance totals on its views that agricultural fundamentals remain strong in 2023 and will see the lowest grain stocks-to-use ratio in over 25 years. Further, NTR believes the Ukrainian crop production will continue to be constrained by the Ukraine war with Russia and will take more than one growing season to alleviate the supply risk from the market.
Analyst Zacks Equity Research found that the Company's Q4 2022 sales lagged the Zacks Consensus Estimate as NTR "faced headwinds from lower sales volumes and higher cost inventory." It noted that the Company successfully repurchased some 53 million shares in 2022 and has already bought back an additional eight million shares in 2023.
With a market valuation of $38.9 billion, NTR is an opportunity trading at a PE ratio of (TTM) 5.31 today. Trading at $77 per share now, its 52-week high is $117.25.
MOS Seen As a Great Dividend Stock
The Mosaic Company (NYSE: MOS) a producer and marketer of concentrated phosphate and potash crop fertilizers for the global agriculture industry, has voted to increase it shareholder dividend yield to 1.6% in 2023. Dividends are seen as easily covered by Company earnings — making this a potentially bright dividend stock, according to SimplyWallStreet. " All of these things considered, we think this has solid potential as a dividend stock ," Simply Wall Street concludes .
MOS has set February 22 for its Q4 and full year 2022 announcement of fiscal results. Its earnings conference call is scheduled for February 23.
Analyst Zacks sees MOS' 8.4% gains over the past month as indicative of a possible 12.1% sales gain YOY fiscal performance . Zack awards MOS an ‘A' for its stock trading at a discount to its peers. Simply Wall Street is encouraged that MOS has been growing its earnings per share at 63% a year over the past five years. This suggests to SWS that MOS is effectively and positively reinvesting in its business.
MOS predicts 2023 will be a ‘strong year' for nutrient application supported by healthy crop prices and grower economics. With a PE ratio stuck stubbornly under five at a (TTM) of only 4.86, MOS enjoys a market cap of $17.0 billion.
In its 10Q SEC filing on November 2, 2022, MOS reported sales for its three months ended September 30 of $5.35 billion, a 56.5% increase from its $3.4 billion the comparable period the previous year. Net income attributable to Mosaic jumped to $841.7 million in the 2022 quarter from $371.9 million the previous year.
The Company cited the war in Ukraine for a disruption of fertilizer and agricultural commodities that resulted in a rise in prices for its products. MOS said Chinese reductions in phosphate exports were impacting the global fertilizer market.
CONCLUSION
Agricultural Specialty Chemicals stocks are attracting investors, especially its undervalued stocks. They should be on every investor's Watch List. Future predictions of a strengthening global market as well as share buyback programs and comparatively low PE ratios (TTM) are attractive. FSI in particular offers investors an early upside to participate in this sector by taking a little more risk. Investors should take a closer look at FSI's outstanding performance. It is trading at a PE (TTM) ratio of less than ten. The company reported a 33% increase in sales for 2022. For full year 2021, it reported a 16% rise in profits on a 10% volume gain. For multiple years, FSI has generated continued increases in both volume and net profit. This is a Company that commercializes its specialty chemicals and offers proprietary and innovative polymer biodegradable additives for peak performance.
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