Corn prices have taken off. Above, a combine fills a cart with harvested corn.
Joe Raedle/Getty Images
The farming input provider Corteva posted solid quarterly earnings Tuesday evening, but better times look to be ahead.
Corteva (ticker: CTVA) reported 79 cents in adjusted per-share earnings from $4.2 billion in sales. Wall Street was looking for 65 cents a share from $3.8 billion in sales.
“This performance demonstrates demand for the innovative and differentiated technology that we bring to the market,” said CEO Jim Collins in the company’s news release. “We are encouraged by a strengthening agriculture outlook, while maintaining agility given market volatility from the variations in the pace and path of recovery across global economies.”
It was a decisive beat and the company raised its full-year forecast for sales. Management, however, left its full-year earnings call unchanged, even though investors like to see guidance increased by at least the amount profits surpass forecasts.
Shares were down about 1% in premarket trading.
The sales forecast increased because of strong demand and strong pricing for Corteva’s seed and chemical products. But costs are rising as well, so the projection for the bottom line didn’t increase.
That might be a surprise to investors because the results come just as corn prices are going parabolic. Corn is a useful benchmark for the agricultural economy. Prices are up about 35% over the past month and are up about 140% over the past year.
Higher corn prices mean higher income for farmers, who can then pay higher prices for crop inputs such as fertilizers. When agricultural commodity prices rise, farmers don’t mind paying higher prices for inputs because crop chemicals boost output.
The agricultural environment looks positive for the company, despite Corteva leaving earnings guidance unchanged. It will take time for Corteva’s pricing to adjust, says KeyBanc analyst Aleksey Yefremov.
“Management did not yet signal upside for the full year,” wrote the analyst in a Wednesday report. “Still, we believe risks to future guidance updates are skewed to the upside.”
Risks to the upside is Wall Street jargon for “good news is coming.” Yefremov rates share Buy and has a $53 price target for Corteva stock.
Management scheduled a conference call at 9 a.m. Eastern time to discuss results. Investors and analysts will be eager to hear about commodity-price inflation and the impact on the company.
Corteva stock is up about 29% year to date, better than comparable gains of the S&P 500 and Dow Jones Industrial Average. Over the past year, Corteva stock has kept up with commodity prices,rising about 90%.
