Is the U.S. concerned about food security as we face a potential recession and agricultural equipment and supplies run short? One would think so, based on the way IBD 50 best stocks have been building bases.
Farm equipment maker Deere (DE), fertilizer companies CF Industries (CF) and Mosaic (MOS), and agricultural supplier Darling Ingredients (DAR) are on the IBD 50, which made its second-straight weekly gain.
The share of Americans who think the U.S. economy is in a recession rose to 61% in October from 59% in September, according to the IBD/TIPP Economic Optimism Index.
Of course, high inflation is exacerbating food insecurity, making it difficult for some households to afford food and other agricultural commodities. And as the conflict between Russia and Ukraine rages on, fertilizers and other agricultural goods are facing supply shortages.
Fertilizer stocks CF Industries and Mosaic are among the stocks that have gained as they attempt to plug holes in the supply of fertilizers. CF is consolidating with a 119.70 buy point, according to MarketSmith chart analysis.
Deerfield, Ill.-based CF makes nitrogen fertilizers, including urea and ammonia nitrate. A member of the agriculture sector, the fertilizer stock has all the hallmarks for an IBD Sector Leader: A Composite Rating of 98, Relative Strength Rating of 97, plus an Earnings Per Share Rating of 99, the highest possible. That’s enough to place it tops among the 13 stocks in its agricultural chemicals group, according to Stock Checkup. The group itself ranks No. 119 out of IBD’s 197 industry groups.
Best Stocks Overcome Supply Shortages
CF is due to report third-quarter earnings on Wednesday. Analysts tracked by FactSet see profit soaring 226% to $3.33 a share from $1.02 a year earlier. Sales are expected to jump 74% to $2.37 billion. For the full year, earnings are pegged to balloon 184% to $18.62 billion on a sales increase of 84% to $11.71 billion.
Mosaic stock hasn’t done as well as CF as it continues to seek direction. However, the stock is trading in line with its 50-day line, and is just short of its 200-day line. The stock is down 35% since hitting a 52-week high on April 18 but has been climbing for a few weeks.
Mosaic is due to report earnings on Nov. 7. The Plymouth, Minn.-based maker of phosphate fertilizers has a Composite Rating of 89 and an RS Rating of 90.
The farm equipment industry has also gained, and is now ranked No. 48. Deere is the top-rated company in its farm machinery industry group, ahead of irrigation company Lindsay (LNN), according to IBD Stock Checkup. The group has climbed from No. 60 a week ago and No. 127 three months ago.
The Relative Strength Rating for Deere climbed to 91. Deere has a strong 98 Composite Rating. And it has a high A rating for its Accumulation/Distribution Rating, which tracks the relative degree of institutional buying vs. selling.
Farm Equipment, Agricultural Supplies Gain
The Moline, Ill.-based company has in the past year reported uneven profit and sales growth.
Earnings grew 16% in the most recent quarter to $6.16 per share. That came on 22% higher revenue, to $14.1 billion. The prior three stanzas, Deere reported 72% higher EPS, a 25% year-over-year drop, then a 20% increase. Sales growth has been a bit more consistent, coming in at 16%, 5% and then 11% before last quarter’s 22% hop.
Deere is scheduled to announce its fiscal 2022 fourth-quarter results on Nov. 23. FactSet’s consensus estimate is for earning of $7.12 a share on sales of $13.46 billion. Analysts expect Deere’s earnings to jump 14% next year to $26.08 a share from 2022’s earnings forecast of $22.85 a share.
Darling, which develops and produces natural ingredients from edible and nonedible bio-nutrients, is in a cup with handle and is approaching a buy point of 80.15. It is trading well above its 50-day and 200-day lines.
This month, Darling announced it’s buying Brazil’s Gelnex, a collagen producer, for about $1.2 billion. Medical, pharmaceutical, sports medicine and research companies use its biomedical gelatin products. The company also serves the biofuel, agriculture and food industries.
Darling is expected to announce third-quarter earnings on Nov. 8. Analysts expect Q3 earnings to grow to $1.45 per share on $1.64 billion in revenue. Darling is ranked No. 1 in the agriculture operations industry group.
Follow Michael Molinski on Twitter @IMmolinski
YOU MAY ALSO LIKE: