Is Corteva Stock a Buy?

As one of the largest companies in the agricultural industry, Corteva (NYSE:CTVA) produces seed and crop protection products designed to optimize farming operations across the globe.

Since the company’s IPO in May 2019, CTVA shares have risen by almost 95%. However, once it hit a high of $68.30 in late 2022, the stock struggled to hold on to these gains.

Concerns around global farming demand caused CTVA to fall over 17% to where it currently trades at around $56.50.

The war in Ukraine was a major factor behind the increased demand for agricultural products in 2022. Fears of a seed or herbicide shortfall have diminished, and prices have decreased. Yet, Corteva’s exit from Russia and global weather effects on crops led to a slight decline in sales volume.

In the face of obstacles, Corteva has achieved revenue growth through price increases. The company recently raised its guidance for the entire year of 2023 due to a successful first quarter.

CTVA also has a 1.13% annual dividend yield, amounting to a quarterly dividend of $0.16 per share.

So is Corteva stock a buy?

Not Familiar With Corteva, Here’s What It Does

The Indiana-based business began as a division of DowDuPont. In 2019, the seed and crop protection segments were spun out to form Corteva. This new, independent company has over 21,000 employees and a market capitalization of over $40 billion.

As the world’s second-largest seed producer, Corteva has continued to expand aggressively. In the first quarter of 2023, the firm acquired the Spanish microbiology technology company Symborg. It also bought out Stoller, a Texas-based biologicals company specializing in plant nutrition, earlier in the year.

Corteva has built profitable partnerships with major names in the industry. The company recently announced a collaboration with Bunge and Chevron to produce a biofuel derived from winter canola hybrids. Bunge and Corteva also announced a separate collaboration to create a soybean variation designed for animal feed.

Crop Protection, Seeds & Money

The company’s operations are split into Seed and Crop Protection segments. Out of Corteva’s $4.88 billion in net sales in the first quarter of 2023, the Seed segment accounted for $2.7 billion, or 55% of net sales. Crop Protection accounted for $2.18 billion, or 45% of the company’s sales in the quarter.

The Seed division includes the Pioneer and Brevant brands. Corteva increased net sales for the segment by 7% year-over-year in the 1st quarter. This was accomplished while enduring slightly lower sales volumes due to the exit from Russia, a shorter season for Brazilian safrinha corn production, and other industry challenges.

The Crop Protection business unit makes herbicides, fungicides, and pesticides designed explicitly for high-yield crops. It also increased net sales in the first quarter, up 5% from the first quarter of 2022.

Corteva recently announced three new products in the Crop Protection segment. Optimum GLY Canola is a herbicide designed to give farmers an additional option for weed control. Vorceed Enlist Corn protects corn crops from above-ground and below-ground insects. Adavelt Active is a fungicide for plants, providing protection from multiple diseases.

Management Upgrades Estimates

The company’s overall net sales of $4.88 billion was a 6% increase from net sales of $4.6 billion in the first quarter of 2022.

Net income of $595 million was a 5.5% increase from 2022’s 1st quarter net income of $564 million. The resulting earnings per share of $0.84 was a 6% year-over-year increase.

Due to Corteva’s first-quarter success and recent acquisitions, management has upgraded its estimates for the rest of the year. The company expects total 2023 net sales to be between $18.6 and $18.9 billion. This increase is due to expectations that farmland will continue to increase in the US.

Although the company experienced a positive quarter, its P/E value is a red flag for investors. Corteva’s P/E ratio is 34.75, which is higher than the rest of the agricultural inputs industry. Given that the industry has an average P/E value of 10, CTVA may still be overvalued even after the recent drop in price.

What Does Wall Street Say? 

Despite overvaluation concerns, 20 out of 27 analysts still rate Corteva stock as a buy, with three analysts predicting the stock will outperform the market over the next 12 months.

The highest forecast has the stock climbing to $82, a 45% increase from where it currently trades. The median forecast has the stock rising almost 24% to $70 in the next 52 weeks.

Six analysts believe the stock is a hold, and only 1 out of 27 rates the stock as a sell. The most bearish forecast predicts the stock will mostly trade even over the next 12 months, increasing only 0.9% to $57.

Is Corteva Stock a Buy?

Corteva manufactures seed and crop protection solutions for the global agricultural industry. The company’s partnerships and acquisitions have helped it to grow into one of the largest agricultural companies in the world. While Corteva has maintained stability and continued growth, the stock has been on a decline since late 2022 that hasn’t turned around.

The high P/E ratio may be reason enough for some investors to stay away. However, CTVA is currently trading over 15% down from where it was less than a year ago. Given the estimated increase in sales from the biologicals acquisition and steady revenue growth at a time when many agricultural companies are fighting shrinking sales, the stock has a lot going for it.

Corteva has proven to be a rock-solid business and a major player in the industry. The growth of the agricultural industry is expected to continue over the next few years. Add in the fact that the company has paid a modest dividend and continued to increase it, and that makes CTVA a stock that belongs on your watchlist.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.