Dj Rwe Plans $1.6 Billion Buyback Due To Expected Usa, Europe Project Delays - Commodities Roundup

The Zacks Agriculture – Operations industry is poised to benefit from innovations and growing consumer demand for healthy products. Positive agricultural export projections for fiscal 2024 support a favorable near-term outlook for the industry. Investments in acquisitions, joint ventures and expansions are expected to further enhance the industry players’ prospects. Continued investments in assets and technology to foster innovation and improve customer service are especially advantageous for companies like Corteva Inc. CTVA, Dole plc DOLE, Adecoagro AGRO and Calavo Growers CVGW.

However, the industry faces significant challenges that impact productivity, sustainability and the well-being of its participants. Fluctuating commodity prices, rising input costs, trade uncertainties and increasing operational expenses have pressured industry players. With costs climbing across the board, companies in this essential sector are grappling with headwinds, which are affecting their operations, profitability and long-term sustainability.

About the Industry

The Zacks Agriculture – Operations industry comprises companies that produce or procure, transport, store, process and distribute agricultural commodities to consumers. It also distributes ingredients to other parts of the agriculture industry (including clothing, animal feed, energy and industrial products). Some industry players engage in dairy operations, land transformation activities and the development of food ingredients using gene-editing technology. The industry encompasses production activities related to the traditional farming of crops (like corn, soybean, wheat and cotton), and livestock and poultry products (including meat, dairy and eggs). The products are mainly sold at grocery stores or exported overseas. These are also used as feedstock for other industries. For example, cotton is used in the clothing industry and corn is used in the ethanol industry.

Factors Shaping the Future of Agriculture - Operations Industry

Agricultural Export Projections: Per the U.S. Department of Agriculture, the agricultural export projection for fiscal 2025 (ending Sept. 30, 2025) of $169.5 billion marks a decline of $4 billion from the revised fiscal 2024 forecast. The fiscal 2025 decline was due to expectations of reduced unit values of soybeans, corn, and cotton, and lower beef volume. Soybean exports are projected to decrease by $1.5 billion to $22.9 billion, and corn exports are expected to drop $900 million to $12.2 billion as declines in unit values outweigh increased volumes for both crops. Cotton exports are forecast to fall $900 million to $4.5 billion due to weakening unit values, with volumes remaining steady. Beef exports are projected at $8.4 billion, suggesting a $1-billion decrease from fiscal 2024, as reduced U.S. production limits exportable supply.

Organic Products & Innovation in Focus: The industry has benefited from the growing consumer demand for healthier food, driving a shift toward organic production techniques, and reducing the use of chemicals and pesticides among agriculturists. Innovations in food processing, better grain-handling methods, increased storage capacity and strong emerging market demand are supporting industry growth. As healthy eating habits rise, the consumption of alternative proteins is expected to increase. Industry players are focusing on improving productivity and innovation, aligning their efforts with trends in food security, health and well-being. Companies are also investing in acquisitions and joint ventures to develop high-quality ingredients and solutions to meet the demand for healthy products.

Elevated Costs: Industry participants are witnessing higher costs, driven by fluctuating commodity prices, inflation-related input cost increases and trade uncertainties. All these factors are impacting agricultural companies' profitability. The surge in input costs due to inflation is one of the most immediate challenges, significantly raising production costs and squeezing profit margins. To mitigate rising raw material costs, companies have implemented pricing strategies. Additionally, industry players are addressing global supply-chain challenges through partnerships and distribution strategies. However, despite these efforts, commodity cost inflation is expected to continue pressuring margins and profitability in the near term.

Companies in the industry are also dealing with increased SG&A expenses due to higher performance-related compensation, project costs, commissions and variable compensation. Investments in technology and innovation to maintain competitiveness are also contributing to elevated operating expenses. The ongoing deleverage in SG&A expenses may continue to impact profitability.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Agriculture – Operations industry is a 13-stock group within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #86, which places it in the top 35% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries resulted from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually gaining confidence in this group’s earnings growth potential.

Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.

Industry vs. Broader Market

In a year, the Zacks Agriculture – Operations industry has underperformed the S&P 500 and the Zacks Consumer Staples sector.

The stocks in the industry have collectively fallen 8.4% in a year against growth of 5.8% for the sector and 33.8% for the Zacks S&P 500 composite.

One-Year Price Performance

Consumer stocks were advancing pre-bell Wednesday as the Consumer Staples Select Sector SPDR Fund was up 0.1% and the Consumer Discretionary Select Sector SPDR Fund was 0.7% higher recently.

CAVA Group shares rose past 16% after the company reported higher fiscal Q3 earnings and revenue. The company also raised its 2024 same-restaurant sales growth outlook.

Dole shares were down over 3% after the company reported a decline in Q3 adjusted earnings.

Arcos Dorados shares were over 4% higher even after the company reported a lower net income and almost flat revenue for Q3.

Dole (DOLE) came out with quarterly earnings of $0.19 per share, missing the Zacks Consensus Estimate of $0.20 per share. This compares to earnings of $0.24 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -5%. A quarter ago, it was expected that this fresh fruit and vegetable company would post earnings of $0.41 per share when it actually produced earnings of $0.49, delivering a surprise of 19.51%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Dole, which belongs to the Zacks Agriculture - Operations industry, posted revenues of $2.06 billion for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 3.14%. This compares to year-ago revenues of $2.04 billion. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Dole shares have added about 36.5% since the beginning of the year versus the S&P 500's gain of 25.5%.

What's Next for Dole?

While Dole has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Dole: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.10 on $2.04 billion in revenues for the coming quarter and $1.21 on $8.29 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Agriculture - Operations is currently in the top 34% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Local Bounti Corporation (LOCL), has yet to report results for the quarter ended September 2024. The results are expected to be released on November 14.

This company is expected to post quarterly loss of $2.78 per share in its upcoming report, which represents a year-over-year change of +8%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Local Bounti Corporation's revenues are expected to be $13 million, up 90.9% from the year-ago quarter.

Zacks Investment Research