Due to the ongoing war between Russia and Ukraine, intensified supply chain disruptions have led to a shortage of agricultural inputs, such as fertilizers and plant protection products. This, along with rising demand for food worldwide, has led to soaring prices for the inputs needed in modern agriculture. This strong demand and high prices should benefit prominent players in this field, such as ICL Group (ICL) and FMC Corporation (FMC). But which of the following is a better buy now? Read on to find out.
The disruptions caused by COVID-19 caused a significant shortage of agricultural inputs needed for healthy and abundant crops over the past two years. Supply disruptions have intensified due to the conflict between Russia and Ukraine. Shortages of agricultural inputs and rising demand for food around the world have caused prices to rise. Among other things, fertilizer prices have skyrocketed.
In addition, innovations in agricultural sciences to help improve crop protection and improve crop yield and quality should help the agricultural inputs industry benefit substantially in the coming months.
ICL Group Ltd (ICL) and FMC Corporation (FMC) are two prominent players in the agricultural inputs industry. Based in Tel Aviv, Israel, ICL produces and markets fertilizers, specialty minerals and chemicals worldwide. The company operates through Industrial Products; potash; Phosphate solutions; and the Innovative Ag Solutions segments. It sells its products through marketing companies, agents and distributors. FMC is an agricultural science company that offers crop protection products, plant health, and professional pest and lawn management to improve crop yield and quality. It markets its products through its own sales organization and through alliance partners, independent distributors and sales representatives.
So far this year, FMC shares are up 8.6% and ICL is up 16.2%. Which of these actions is best to choose now? Let’s find out.
On May 19, 2022, ICL partnered with the startup accelerator StartLife to invest in startups focused on addressing global challenges in agricultural and food production, ranging from increased yields and the fight against food insecurity. to the reduction of greenhouse gas emissions. As ICL’s ICL Planet Startup Hub seeks to establish a new generation of plant nutrition solutions, this partnership is expected to accelerate innovation in the agri-food technology ecosystem, along with potential goals such as mineral recycling, extraction of waste streams and conversion into fertilizers or the development of innovative functional proteins for clean label applications, among others.
On December 9, 2021, FMC signed multi-year agreements with Corteva, Inc. (CTVA) Corteva Agriscience will continue to supply Rynaxypyr and Cyazypyr assets to Corteva for seed treatment products. These multi-year agreements extend the existing global collaboration between the two companies.
Recent financial results
ICL sales for the first fiscal quarter of 2022, which ended March 31, 2022, rose 67.2% year-over-year to $ 2.53 billion. The company’s gross profit was $ 1.25 billion, up 151.5% from the previous year. Its adjusted operating income was $ 880 million, an improvement of 375.7% year-on-year. While its adjusted net income rose 354.1% year-on-year to $ 613 million, its adjusted profit grew 345.5% to $ 0.49. As of March 31, 2022, the company had $ 439 million in cash and cash equivalents.
For the first quarter of fiscal year 2022 which ended March 31, 2022, FMC revenue increased 13% year-over-year to $ 1.35 billion. The company’s gross profit was $ 572.70 million, an improvement of 11.8% year-on-year. Its operating income amounted to $ 226.80 million, 18.6% more than last year. FMC’s adjusted net income from continuing operations was $ 238.70 million, 19.4% more than last year. Its adjusted BPA stood at $ 1.88, an improvement of 22.9% year-on-year. As of March 31, 2022, the company had $ 365.10 million in cash and cash equivalents.
Past and expected financial performance
Over the past three years, ICL’s revenue, EBITDA and EPA have increased to CAGRs of 12.7%, 79.7% and 40.8%, respectively.
ICL’s EPA is expected to increase 182.2% year-over-year in fiscal year 2022 through December 31, 2022, and decrease 38.1% in fiscal year 2023. Its revenue will grow by 47.4% in fiscal year 2022 and decrease by 15.7% in fiscal year 2023. Analysts expect the company’s EPA to increase at a rate of 3.9% annually over the next five years .
Over the past three years, FMC’s revenue, EBITDA and EPA have increased to a CAGR of 6%, 7.4% and 20.3%, respectively.
Analysts expect FMC’s EPA to grow 9.8% year-over-year in fiscal year 2022 through December 31, 2022, and 15.3% in fiscal year 2023. Revenue is expected to grow 7.6% year-on-year in fiscal year 2022 and 5.9% in fiscal year 2022. fiscal year 2023. Analysts expect the company’s EPA to grow at an 8% annual rate over the next five years.
In terms of non-GAAP PEG forward, FMC is currently trading at 1.60x, 81.8% higher than ICL’s 0.88x. In terms of advanced sales / EVs, ICL’s 1.67x compares to FMC’s 3.41x.
ICL’s subsequent 12-month income is almost 1.5 times that of FMC. ICL is also more profitable, with 28.9% EBITDA margin compared to 26.4% FMC.
In addition, ICL’s ROE, ROA, and ROTC of 28.4%, 11%, and 15.6% are compared to FMC’s 27.4%, 7%, and 10.9%, respectively.
Although ICL has an overall rating of A, that translates to Strong Buy on our property POWR ratings system, FMC has a general C grade, equivalent to Neutral. POWR scores are calculated taking into account 118 different factors, each weighted to an optimal grade.
Both ICL and FMC have been rated B for quality, in line with their superior profitability ratios in the industry. The EBIT margin at the end of 12 months of ICL of 23.7% is 66% higher than the industry average of 14.3%. FMC has a 12-month EBIT margin at the end of 23.1%, 61.9% lower than the industry average of 14.3%.
ICL has been rated A in terms of growth, which is in sync with its higher growth rates than the industry over the past year. ICL’s EBIT has grown 390.4% over the past year, 764% above the industry average of 45.2%. FMC grade C for growth reflects its lower growth rates than those in the industry. FMC’s EBIT has grown 16.2% over the past year, 64.2% below the industry average of 45.2%.
Of the 33 stocks of the Agriculture industry, ICL ranks No. 1, while FMC ranks No. 13.
Beyond what we said above, our POWR rating system has rated FMC and ICL by Sentiment, Value, Stability and Quality. Get all FMC scores here. Too, click here to see additional POWR ratings for ICL.
Given the increasing need for agricultural inputs to meet the growing demand for food by improving crop yields, it should benefit both ICL and FMC. However, a relatively lower valuation and higher profitability make ICL a better buy now.
Our research shows that the chances of success increase if you bet on stocks with a total POWR score of buy or strong buy. Click here to access the most valued actions in the agricultural sector.
ICL shares were trading at $ 11.24 per share on Friday afternoon, down $ 0.13 (-1.14%). So far this year, ICL has gained 17.37%, compared to a -17.71% increase in the S&P 500 benchmark index over the same period.
About the author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. He is passionate about educating investors to succeed on the stock market.
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