A global seed and crop protection stock called Corteva Agriscience should be on investor watch lists.
Corteva, currently trading at $58.59 US, leads in the field as number one corn and soybean seed supplier in the United States, number two in cotton and canola and number one biological crop protection operation on the globe.
A spin-off from Dupont in 2018, growth has been spurred by margin increases, new product advances and acquisitions. In 2019 the seed business became huge with acquisition of Pioneer Seeds.
With eight per cent of revenues spent on research and development Corteva plans to continue growth by new products, (400 last year), gene editing, biofuels and a new hybrid wheat.
The hybrid wheat coming in 2027 targets 550 million acres of the crop planted annually. This strain yields 10 per cent more in regions with adequate rain and up to 20 per cent more in regions with dry conditions.
Farmers have experienced more and more heat stress around the globe recently. Climate change is expected to increase demand for water-efficient seeds.
Farmers are being asked to do more to feed growing populations with less — less land, and less chemical crop protection.
The leader in biological crop protection with $500 million annual revenues and $1 billion expected by 2030, Corteva will capitalize on the transition to reduce chemical treatments that harm watersheds, beneficial insects and aquifers.
Up to 40 per cent of global crops are lost to pests, thus building a huge market.
With over $17 billion revenue the Delaware-based company is among the top global crop protection providers competing with Bayer and BASF.
Corteva has 62 per cent of the market share for seeds in North America, 17 per cent in Latin America, 16 per cent in emerging markets and the Middle East, and five per cent in the Asia Pacific region.
In crop protection, Corteva has about 35 per cent of the market in both North America and Latin America, 15 per cent in emerging markets and the Middle East, and 10 per cent in Asia/Pacific.
Operating earnings were up about 60 per cent between 2020 and 2024.
Priced at a premium 22 times earnings, the shares reflect a decline in the third quarter earnings. The price fell but after an early January investor day, the shares popped about $5, indicating enthusiasm by analysts and institutional holders.
Twenty-seven analysts had a consensus share price of $58.59 within the next year The targets ranged from $50 to $74 with a post-investor day target set at $83.
Technical indicators show investors are accumulating the shares.
Corteva seems well-priced with an investor premium but in the long term should show smart returns.
Investors may have opportunity to buy on price dips this year as the general market is set for a good correction. Many analysts believe the market is ripe for a 10 per cent to 20 per cent decline after two years of excellent returns.
The margin and price-squeezed agriculture industry may buy fewer crop protection products too.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
