Which Ag Stock has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 agriculture stocks rank via earnings trends:

Deere & Co. (NYSE:DE): Current Price $90.54

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 28,440 23,110 26,000 32,010 36,160
Diluted EPS ($) 4.70 2.06 4.35 6.63 7.63

We see that Deere sharply grew both revenue and EPS between 2009 and 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 6,766 10,010 9,590 9,792 7,421
Diluted EPS ($) 1.30 2.61 1.98 1.74 1.65

Unfortunately, we see that both quarterly revenue and EPS have turned south after April 2012, and we must drop Deere from the reckoning…

Monsanto Co. (NYSE:MON): Current Price $102.71

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 11,360 11,680 10,480 11,820 13,500
Diluted EPS ($) 3.62 3.77 1.99 2.96 3.79

Quite obviously, the last three years have been good for Monsanto and we see excellent growth in revenue and EPS.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Nov. 30, 2011 Feb. 29, 2012 May. 31, 2012 Aug. 31, 2012 Nov. 30, 2012
Revenue ($) in millions 2,439 4,748 4,219 2,098 2,939
Diluted EPS ($) 0.23 2.24 1.74 -0.42 0.63

We note that the August 2012 quarter was a washout, maybe seasonal, but Monsanto bounced back in the next quarter with a sharp jump in the top-line and EPS.

Potash Corp. of Saskatchewan, Inc. (NYSE:POT): Current Price $41.75

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 9,446 3,977 6,539 8,715 7,927
Diluted EPS ($) 3.64 1.08 1.95 3.51 2.37

The annual results here for Potash Corp are rather bumpy and we are concerned about the deterioration seen in 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,865 1,746 2,396 2,143 1,642
Diluted EPS ($) 0.77 0.56 0.60 0.74 0.48

Potash has not done too well in the last quarter out there, and there’s a sharp fall in revenue and EPS. We’ll drop Potash from our list…

Mosaic Co. (NYSE:MOS): Current Price $61.94

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 9,813 10,300 6,759 9,938 11,110
Diluted EPS ($) 4.67 5.27 1.85 5.62 4.42

Revenue and EPS at Mosaic Co has jumped sharply after 2010, though EPS in 2012 is somewhat lower than 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Nov. 30, 2011 Feb. 29, 2012 May. 31, 2012 Aug. 31, 2012 Nov. 30, 2012
Revenue ($) in millions 3,014 2,190 2,820 2,505 2,536
Diluted EPS ($) 1.40 0.64 1.21 1.01 1.47

Though revenue has remained essentially flat in the last two quarters, we like the sharp uptick EPS in the latest quarter. Mosaic Co is promising…

Agrium Inc. (NYSE:AGU): Current Price $107.98

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 5,270 10,030 9,129 10,740 15,470
Diluted EPS ($) 3.28 8.34 2.33 4.52 8.68

These are solid numbers from Agrium, with aggressive growth seen in revenue and EPS between 2009 and 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 3,141 3,177 3,629 6,834 2,962
Diluted EPS ($) 1.85 1.20 0.97 5.44 0.80

In the quarterly numbers, we are concerned about the sharp fall in revenue and EPS in the September 2012 quarter and must look elsewhere…

Conclusion

In this “E-Squared” investment analysis of agricultural companies, we choose Mosaic Co over Monsanto because of its better earnings record.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!