For Immediate Release
Chicago, IL – October 13, 2021 – Zacks Equity Research shares Nutrien NTR as the Bull of the Day, and B&G Foods, Inc. BGS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BRT Apartments Corp. BRT, J & J Snack Foods Corp. JJSF, and GoldMining Inc. GLDG.
Here is a synopsis of all five stocks:
Bull of the Day:
Nutrien is benefiting from soaring fertilizer prices and a hot agriculture market. This Zacks Rank #1 (Strong Buy) is expected to grow its earnings by 178% this year.
Nutrien is the world’s largest provider of crop inputs and services. It produces around 27 million tonnes of potash, nitrogen and phosphate products world-wide.
It also has a significant agribusiness, including its retail segment, Nutrien Ag Solutions.
Weather and Natural Gas Prices Disrupt the Fertilizer Market
Agricultural fertilizers, which includes the nitrogen fertilizers of ammonia and urea, as well as potash and phosphates, have seen soaring prices in 2021.
The record prices are a result of a combination of events including Hurricane Ida shutting down nitrogen plants in Louisiana, difficulty with logistics, soaring natural gas prices in Europe leading to shutdown of nitrogen production there, and China restricting phosphate and urea exports.
The result is record high prices in some fertilizers which were last seen during the golden 2008 rally.
But this time around, these “events” which have pushed up prices, are expected to continue to impact the market until the beginning of 2022, and maybe beyond.
Several fertilizer producers, including Nutrien, closed facilities in Louisiana during Hurricane Ida. That production has slowly been coming back online.
At the same time, soaring natural gas prices forced CF Industries to shut 2 of its nitrogen plants in the United Kingdom, which only came back online after intervention from the British government.
Other nitrogen producers apparently remain closed throughout Europe.
A Fertilizer Shortage?
On Sep 22, Nutrien told Reuters that it was sold out of its potash production in the third quarter in North America even though the company increased potash production earlier in the year.
And farmers, faced with record high fertilizer prices, may buy less or change crops to try and keep fertilizer costs down which could also impact sales volumes.
Analysts Raise 2021 and 2022 Earnings Estimates
In the face of the record high prices and all the industry disruptions, the analysts are still bullish on Nutrien.
One estimate was raised in the last week for 2021 and 2 are higher in the last month.
The 2021 Zacks Consensus Estimate has jumped to $5.01 from $4.93 in the prior 30 days and is up from $3.75 just 3 months ago.
That’s earnings growth of 178% as the company only made $1.80 last year as the pandemic hit.
For 2022, 3 estimates have been raised in the last month, pushing the Zacks Consensus up to $5.83 from $5.43 in the last 30 days.
That’s another 16% earnings growth.
Shares at All-Time Highs
Nutrien has only been a public company since 2018, when Agrium merged with Potash to form Nutrien.
But shares are up 48.2% on the strong agriculture market and rising fertilizer prices.
This is a new high for Nutrien shares.
But for some perspective, shares are up just 28% since the 2018 merger compared to the S&P 500 which is up 60% during that time.
Nutrien is cheap, with a forward P/E of just 14.
Nutrien is also shareholder friendly, paying an industry leading dividend yielding 2.6%. Mosaic’s dividend yields just 0.7% and CF Industries’ 2%.
Nutrien will report third quarter results on Nov 1.
For investors looking for a way to play the agriculture bull market, Nutrien is one to keep on the short list.
Bear of the Day:
B&G Foods, Inc. is battling extreme inflation in the food industry in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a decline in earnings in 2021.
B&G Foods manufactures and sells branded shelf-stable and frozen foods across the United States, Canada and Puerto. It owns more than 50 brands, including Cream of Wheat, Crisco, Dash, Las Palmas, Spice Islands and Green Giant, to name a few.
Third Miss in a Row in the Second Quarter
On Aug 5, B&G Foods reported its second quarter results and missed on the Zacks Consensus Estimate for the third straight quarter.
Earnings were $0.41 versus the consensus of $0.47.
B&G Foods was a big beneficiary of the “eat at home” trend that occurred when the pandemic hit in 2020.
Sales soared as consumers rushed to fill up their freezers.
The second quarter comparables from 2020 were always going to be difficult to beat.
Net sales fell 9.4% to $464.4 million and base business net sales decreased 20.8% due to the comparisons to the extraordinary demand and pantry loading at the height of the COVID-19 pandemic last year. It was partially offset by the Crisco acquisition.
Compared to 2019, or pre-pandemic, however, net sales and base business net sales for the second quarter of 2021 were 25.1% and 7.1% higher.
Consumer trends of cooking and baking at home which began during the pandemic, are expected to continue.
Food Inflation is Real
In August, the company didn’t mince words about the inflation in the economy, calling it “unprecedented.”
“We identified the risks of inflation early and have initiated price increases and cost savings initiatives to offset these costs,” said CEO Casey Keller.
“While the impact of pricing and cost savings may lag behind the rising input costs, we expect our margins to remain fairly stable in the long term,” he added.
However, B&G Foods expects to see further cost inflation in 2022.
Analysts Cut Earnings Estimates for 2021 and 2022
Analysts are bearish about the future even though the company says it expects stable margins this year.
2 estimates have been lowered over the last 2 months for 2021.
That has pushed the Zacks Consensus Estimate down to $1.96 from $2.08.
That is an earnings decline of 13.3% as the company made $2.26 during 2020.
2 estimates have also been lowered for 2022 over the last 60 days. The 2022 Zacks Consensus Estimate has fallen to $2.17 from $2.34, but that’s earnings growth of 11%.
Looking for a Big Dividend Payout?
B&G Foods is a popular stock among those investors looking for income because it is dedicated to returning money to its shareholders.
It has paid a quarterly dividend every quarter since its initial public offering in Oct 2004, or 68 consecutive quarters.
That dividend is currently yielding a juicy 6.5% yield.
The dividend was not cut during the pandemic.
Shares Tread Water
Like many companies that pay out a large income to shareholders, share appreciation isn’t much of a concern.
B&G Foods, however, has gained 6.5% year-to-date.
It’s still cheap, with a forward P/E of 15.
Margins are likely to be challenged into next year due to inflationary pressures but investors looking for income may want to keep it on their watch list for when those earnings estimates start to turn around.
3 of the Best Stocks to Buy as Inflation Threat Rises
U.S. consumers at present have been splurging more on non-durable goods than they did last year. An increase in wages and healthy job additions for quite some time did boost consumer outlays. Citing a Wall Street Journal article, personal outlays on goods and services rose 0.8% in August. Consumers’ personal income too increased 0.2%, according to the Commerce Department. Consumers’ views about the state of the U.S. economy did improve last month, indicating that consumers may spend more in the near future (read more: 5 Top Consumer Discretionary Stocks to Buy for Q4).
However, the U.S. economy is also facing the threat of higher energy prices at the moment. Notably, if energy prices continue to scale northward, it could easily push up the prices of essential commodities in the near future and dampen consumer spending. Therefore, inflation will lead to fewer consumer outlays, and will eventually slow down economic growth.
Nonetheless, talking about higher energy prices, coal price is now at a record high, while heating oil has soared 68% so far this year, as mentioned in another Wall Street Journal article. The article further stated that the price of natural gas has almost doubled in the last six-month period to hit a seven-year high. Interestingly, prices at pumps are now a little over $3 a gallon, which is up almost a dollar in the past 12-month period. In fact, Americans are now paying more at gas stations than they have since 2014.
What’s more, this year crude oil has surged 64% to a seven-year high. In reality, oil prices have jumped more than 16% since the beginning of last month. On Oct 11, the U.S. crude benchmark – West Texas Intermediate, touched a high of more than $82 a barrel, the highest level since 2014, citing a Financial Times article. Shortage of natural gas did increase the demand for various energy s, ultimately leading to higher oil prices.
Coming back to inflation, it’s worth pointing out that the Fed’s preferred gauge of inflation has actually jumped the most in the last three decades on a yearly basis, raising concerns that prices of essential goods will continue to increase in the near term and hit consumers’ outlays. Citing a MarketWatch article, the government had stated that the personal consumption expenditure (PCE) index increased 0.4% in August from a month earlier. Most importantly, the PCE index jumped to 4.3% in August from a year earlier, its highest rate since 1991.
Thus, from an investment standpoint, it’s not congenial for investors to invest in growth stocks as inflation may easily impact their future cash flows. But there are stocks that benefit from a rise in inflation, which at present should be enticing enough for investors. For instance, real estate tends to gain from an increase in inflation. After all, inflation leads to an increase in property prices. Thus, one can invest in real estate through a real estate investment trust (REIT).
Similarly, companies in the consumer staples sector benefit from an increase in inflation. This is because such companies have pricing power, meaning they can increase the prices of their commodities with inflation. At the same time, gold doesn’t tend to lose its shine amid rising inflation. The best way to invest in gold is through gold mining stocks.
We have, hence, highlighted three noteworthy stocks from the aforesaid areas that stand to gain from a rise in inflation. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
BRT Apartments Corp. is a real estate investment trust. The Zacks Consensus Estimate for its current-year earnings has moved up 19.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 10.7%.
J & J Snack Foods Corp. is an American manufacturer, marketer, and distributor of branded niche snack foods and frozen beverages for the food service and retail supermarket industries. The Zacks Consensus Estimate for its current-year earnings has moved up 6.8% over the past 60 days. The company’s expected earnings growth rate for the current year is almost 182%.
GoldMining Inc. is a mineral exploration company. It is focused on the acquisition and development of gold assets principally in the Americas. The Zacks Consensus Estimate for its current-year earnings has moved up 650% over the past 60 days. The company’s expected earnings growth rate for the current year is 466.7%.
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B&G Foods, Inc. (BGS): Free Stock Analysis Report
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