Agriculture refers to the active cultivation of animals, plants, crops, and food for the purposes of selling, processing, and/or producing feed for profit. Agriculture is a blanket term referring to agribusiness and all related industries dealing with the production of food and its various uses.
For a company with just one operating division that’s generating meaningful growth, E. I. du Pont de Nemours and Company (DD) seems to have an uncanny ability to appreciate in value on the stock market.
DuPont is a big player in the agriculture sector, and this operating division is somewhat of a proxy on the sell-side industry.
Last quarter, the company reported sales growth of five percent to $7.7 billion. The company’s agricultural division experienced the best gain, with a 15% hike in sales to $1.6 billion.
If institutional investors buy the stock market based on improving balance sheets, DuPont’s fits the bill. The company’s third-quarter cash position soared from $4.3 billion to $7.0 billion.
The stock was trading around $45.00 a share at the beginning of the year, and it is currently trading at approximately $62.00 with a 2.9% dividend yield. For such a mature enterprise, an impressive capital gain like this is indicative of a monetary policy-induced stock market, where even slow-growth enterprises have been bid significantly.
Across the board, Wall Street has been increasing DuPont’s earnings estimates for this year and next. For 2013, total sales are expected to grow approximately three percent, accelerating to 6.3% in 2014.
Current earnings growth consensus for 2014 is approximately 12%, and with a three percent dividend yield, a forward price-to-earnings (P/E) of 14 isn’t unreasonable. (See “My Six Favorite Growing Dividend Payers.”)
These big, brand-name corporations can really pay, but usually only after a major correction or shock that provides a good entry point into the stock market.
Well, it turns out that third-quarter earnings were pretty good for E. I. Du Pont de Nemours and Company (DD). The company surprised with solid volume growth and its cash balance soared.
DuPont recently broke out of a two-year-long stock market consolidation. Still yielding around three percent, this position is not expensively priced, and its latest numbers were very good, considering the size and maturity of this business.
The company’s third-quarter consolidated sales grew five percent to $7.7 billion. The strongest division was, once again, in agriculture, with a 15% gain in sales to $1.6 billion on stronger volumes and higher pricing in Latin America.
Every single operating division posted improved operating earnings comparatively, except for the company’s performance chemicals business. Sales in Europe, the Middle East, and Africa (EMEA) grew a surprising 10% during the quarter, while sales in North America and the Asia Pacific grew three percent; Latin American sales grew four percent.
Of note was the company’s strong improvement in shareholders’ equity, and as is typical with so many large corporations, DuPont’s cash and cash equivalents balance soared to $7.0 billion, from $4.3 billion at the end of 2012.
The company’s third-quarter dividend was $0.45 a share, compared to $0.43 in the same quarter last year. Another dividend increase is likely within the next two quarters; the company can certainly afford it.
As I stated before, the most important division for DuPont is its agriculture business. Third-quarter expenditures on research and development were $540 million, compared to $521 million in the same quarter last year. Virtually all of the increased spending was dedicated to the company’s agriculture … Read More
Keeping tabs on the reporting is a great way to find new companies for potential investments. The earnings game is managed, but generally speaking, the numbers are the numbers and a great quarter can be a good catalyst for a stock.
One interesting company that just reported another solid quarter of both revenue and earnings growth is Neogen Corporation (NEOG). This company operates in a very specific business area: food safety and animal safety products.
Based out of Lansing, Michigan, Neogen’s food safety division sells diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, and plant diseases, along with sanitation. The company’s animal safety division is involved with animal genomics and sells all kinds of animal healthcare products, diagnostics, pharmaceuticals, veterinary instruments, wound care products, and disinfectants.
This is a good mid-cap business with a track record of increasing its revenues and earnings. The stock’s also been a very strong performer, not only because the company delivers on its promises, but because it’s the kind of enterprise that institutional investors just love to own. Neogen’s 10-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
In its first fiscal quarter of 2014 (ended August 31, 2013), Neogen’s revenues grew a solid 18% to $58.6 million. The company recently digested an acquisition, but company management said it experienced significant growth in core product lines, as well as strong sales outside the U.S. market.
Earnings grew 17% during the … Read More
If E. I. du Pont de Nemours and Company (DD) didn’t have its burgeoning agriculture business, the stock would be in the tank. Instead, this slow-growth conglomerate has really surprised with its performance on the stock market this year. It’s definitely a value play among institutional investors—and a dividend one at that.
With a current dividend yield of approximately 3.2% and a price-to-earnings ratio of around 12, DuPont is seemingly breaking out of a long-term price consolidation on the stock market. It’s been 13 years since the position convincingly broke through $50.00 a share, and all the while, the company’s agriculture division has been flourishing.
If the rest of the company’s operations could grow, its share price would be much higher.
In the second quarter of 2013, the company’s total revenues actually fell to $9.84 billion, down from $9.92 billion in the second quarter of 2012.
Earnings also fell to $1.03 billion, or $1.11 per diluted share, down slightly from earnings of $1.17 billion, or $1.23 per diluted share, in the comparable quarter last year.
Interestingly, the company’s cash position soared along with shareholders’ equity. (See “Why DuPont’s Earnings Results Are So Typical for This Stock Market.”)
DuPont said that its agriculture sales grew a solid seven percent in the most recent quarter due to rising prices in global seed sales and stronger volumes in insecticides and fungicides. The two latter components are a huge part of global agriculture business.
America has a national debt that is nearing $17.0 trillion. The Chinese own a good portion of this debt. The country also has about $3.5 trillion in foreign exchange reserves at its disposal, according to the South China Morning Post. (Source: “Beijing to create forex investment agency,” China Economic Review, August 7, 2013.)
That’s a lot of money that needs to be invested. But according to the article, the People’s Bank of China (PBC) is looking at the development of a new unit that will help to invest the funds. Currently, investing the reserves is the responsibility of China Investment Corporation, which has invested about $480 billion.
What I see is this: the continued movement of invested capital into foreign countries by China is a strategy for diversification and a means by which the country can get its hands on raw materials and intellectual property. We saw this with the acquisition of mining and oil companies in North America, along with major investments in the oil fields and mines in South Africa.
Call it the “Red Invasion,” but I expect foreign acquisitions to pick up going forward, especially with the creation of another agency by the PBC. Of course, China has its eyes on many companies, but receiving approval for the takeovers is another question.
Even the proposed takeover of pork producer Smithfield Foods, Inc. (NYSE/SFD) by Shuanghui International Holdings Limited was met with some resistance, but now it looks like the deal will go through.
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