Agricultural giant Corteva (NYSE:CTVA) stock is getting considerable interest, especially from passive income seeking investors as well as those interested in agricultural shares in a post-coronavirus world.
Analysts are debating whether now is a good time to invest in agricultural stocks. After all, we all need to eat, whatever the health and economic realities are of the novel coronavirus pandemic.
The dividend yield of CTVA stock stands at 1.7% and shares are down 8% so far this year. Investors with a two- to three-year time horizon may consider buying the dips in the shares.
CTVA Stock at a Glance
Corteva is one of the firms formed as a result of the 2019 split of DowDuPont, a company which was originally born from the merger of chemical giants Dow and DuPont, into three separate companies:
- Corteva, currently one of the world’s largest agrochemical companies.
- DuPont de Nemours (NYSE:DD), the new name that DowDuPont acquired.
- Dow (NYSE:DOW), which is dubbed the ‘new’ Dow.
Following the three-way spin-off, each of these companies started their respective journeys as an independent entity. CTVA initially started trading in June 2019 around $25 and traded for months in a range from about $24 to $32 per share.
In February, investors in CTVA stock were beginning to believe in the strength of the shares when they went over $32. Yet on March 18, the shares hit an all-time low of $20.38. Now they’re hovering near $27. So, CTVA has been a great range-trading stock, mostly between $25 and $30.
First-Quarter Earnings
In early May, Corteva reported robust first-quarter results. Net sales were $3.96 billion, up 16% versus the year-ago period, with double-digit organic sales growth in every region. Close to half the revenue comes from North America.
The bottom line totaled $272 million, or 36 cents per share. This compares with $164 million, or 22 cents per share, in last year’s first quarter.
Two main segments bring in the revenue:
- Seed (62% of total revenue), which includes most corn, soybean and other oilseeds.
- Crop protection (38%), which includes mostly herbicides, insecticides, and fungicides.
The seed segment develops commercial seeds for farmers around the world. Quarterly seed sales rose 27% on an organic basis, primarily due to increased corn deliveries in North America, coupled with strong sunflower and corn sales in Europe.
The crop protection segment has products that protect against weeds, insects and disease, and that improve overall crop health. In the first quarter, crop protection sales also improved 10% on an organic basis, due to increased demand for new products globally. Latin America especially saw strong demand thanks to product launches.
Yet management suspended full-year 2020 guidance in light of uncertainty from the novel coronavirus pandemic. CTVA shares have been in the green over the past month.
The Bottom Line on CTVA Stock
Now that a full year has passed since the spin-off, I believe Corteva’s business operations and earnings are likely to get on more solid footing in the coming months. It is a leader in the development of seeds and crop chemical products.
Despite the lockdown and the ensuing uncertainty about life after coronavirus, one thing that is crucial for everyone globally is food. And agricultural commodities play a big role in the food consumed. Therefore the sector is likely to be promising in the near future.
Even if you are not ready to invest in CTVA stock yet, I suggest you at least keep it on your list for the time being. Any price slip toward $25 level would make the shares rather attractive.
Alternatively, you may consider starting an at-the-money or slightly in-the-money covered calls with Aug 21 expiry. You’d also be able to benefit from the company’s dividend.
You may also consider investing in an exchange-traded fund that has CTVA stock as holding. Examples would include the Materials Select Sector SPDR Fund (NYSEARCA:XLB), Wide MPAT Vaneck ETF (NYSEARCA:MOAT) or the Invesco S&P Spin-Off ETF (NYSEARCA:CSD).
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.
