Zacks Industry Outlook Highlights West Fraser Timber, CalMaine Foods, Andersons and Hydrofarm

For Immediate ReleaseChicago, IL – January 16, 2025 – Today, Zacks Equity Research discusses West Fraser Timber Co. WFG, CalMaine Foods CALM, The Andersons, Inc. ANDE and Hydrofarm HYFM.Industry: Agriculture ProductsLink: https://www.zacks.com/commentary/2397138/4-agriculture---products-stocks-to-watch-despite-industry-concernsThe Zacks Agriculture - Products industry has been bearing the brunt of high input costs, labor shortages and supply-chain headwinds. The decline in commodity prices adds to the concerns. Nevertheless, increasing consumer awareness regarding food ingredients and the preference for healthier alternatives will support the industry. Alternative agricultural technologies like hydroponics and vertical farming are expected to be other key catalysts, given their inherent benefits.Companies like West Fraser Timber Co., CalMaine Foods, The Andersons, Inc. and Hydrofarm are poised to gain from strong end-market demand and their ongoing strategic growth initiatives aimed at capitalizing on these trends.Industry DescriptionThe Zacks Agriculture – Products industry comprises companies that are either involved in storing agricultural commodities, distributing ingredients to others or engaged in farming crops, livestock and poultry products. Some are engaged in purchasing, storing, transporting, processing and selling agricultural commodities or products derived from the same. They operate grain elevators, wherein income is generated from commodities bought and sold using these elevators or held as inventory.Some companies provide nutrients, advanced indoor and greenhouse lighting, environmental control systems and accessories for hydroponic gardening, the method of growing plants using mineral nutrient solutions in a water solvent instead of soil. A few players offer innovative, plant-based health and wellness products. Companies producing lumber also fall under this industry.Trends Shaping the Future of the Agriculture - Products IndustryLow Commodity Prices, High Costs Act as Woes: Agricultural commodity prices have been weighed in the past year by ample supply. Players in the industry are facing rising labor, packaging and distribution costs, among other expenses. The industry continues to navigate a tight labor market with a spike in wages and higher distribution costs. They have been making efforts to bolster their financial conditions, conserve cash and improve profitability by implementing pricing and cost-reduction actions, which are likely to help sustain margins in the future.Solid Demand to Propel Industry Growth: The demand for food is directly influenced by population, demographic shifts and income growth. Per the United Nations, the global population is expected to grow to 8.6 billion in 2030 and 9.8 billion in 2050. This will drive a 50% increase in global food demand. Consumers are now focused on healthier food alternatives.To capitalize on this, several agricultural and food-based companies are investing in innovation and augmenting their product and market strategies to bring new quality and healthy food ingredients to the market. Ongoing improvements in grain-handling techniques and investment in larger storage spaces will likely support the industry. Given that food remains an essential commodity regardless of the condition of the economy, the industry benefits from stable earnings across economic cycles.Hydroponics & Cannabis are Key Catalysts: Hydroponics is gaining popularity as it gives growers control over nutrient delivery, light, air, water, humidity, pests and temperature in an indoor setting. This method enables faster crop growth, with higher yields than traditional soil-based cultivation. It is being utilized in new and emerging industries, including the cultivation of cannabis and hemp.Vertical farms producing organic fruits and vegetables also utilize hydroponics due to the shortage of farmland and environmental vulnerabilities. Vertical farming is the latest agricultural technology, wherein shelves and artificial lighting systems are used to grow produce, thereby minimizing land and water consumption.Total sales for the hydroponic equipment industry are projected to reach $67 billion by 2033. Even though the cannabis industry is undergoing a rough patch due to an oversupply, its long-term prospects remain intact. In the United States, several states have legalized cannabis for medical or recreational use, making it the largest market in the world. Spending on legal cannabis is projected to increase at a steady pace each year in North America and reach $57 billion by 2028.Zacks Industry Rank Indicates Dull ProspectsThe Zacks Agriculture - Products industry is part of the broader Zacks Basic Materials sector. The industry currently carries a Zacks Industry Rank #174, which places it in the bottom 28% of the 242 Zacks industries.The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the downward earnings per share outlook for the constituent companies in aggregate. In the past year, the industry's earnings estimates for 2024 have moved down 27%, and the same for 2025 has gone down 28%.Before we present a few Agriculture - Products stocks that investors can keep an eye on, it is worth looking at the industry’s stock-market performance and valuation picture.Industry Versus Broader MarketThe Zacks Agriculture – Products industry has outperformed its sector but lagged the Zacks S&P 500 composite over the past 12 months. Stocks in this industry have moved up 1.4% in the past 12 months against the Basic Materials sector’s 5.1% decline. The S&P 500 has gained 23.6% in the same time frame.Industry's Current ValuationOn the basis of the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Agriculture - Products stocks, we see that the industry is currently trading at 4.75X compared with the S&P 500’s 13.96X. The Basic Materials sector’s forward 12-month EV/EBITDA is 6.64X.Over the last five years, the industry traded as high as 9.55X and as low as 3.54X, with the median being 4.69X.Four Agriculture - Products Stocks to Keep an Eye onWest Fraser: The company has been witnessing solid demand for Oriented Strand Board, plywood and other engineered products in North America, driven by the home construction markets. Stabilization of inflation and interest rates, a significant portion of the population reaching the typical home buying stage and an aging U.S. housing stock are expected to aid new home construction and repair and renovation spending, thereby driving demand for WFG.The company’s strategy of optimizing its portfolio through divestitures and mill curtailments is expected to contribute to earnings. West Fraser is also making significant capital investments to modernize its mills. Ongoing efforts to improve efficiency and lower costs will aid margins. With strong financial flexibility and a favorable cost position, West Fraser is well-positioned to maintain a competitive edge.The Zacks Consensus Estimate for this Vancouver, Canada-based company’s earnings for 2025 indicates year-over-year growth of 507%. West Fraser has a trailing four-quarter earnings surprise of 171%, on average. This diversified wood product company currently carries a Zacks Rank of 3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.CalMaine Foods: The company recently reported solid second-quarter fiscal 2025 results aided by robust demand and elevated egg prices. The outbreak of the highly pathogenic avian influenza (HPAI) in U.S. poultry flocks has boosted eggs, which bodes well for the company. The preference for specialty eggs (including cage-free eggs) continues to surge, driven by state mandates and consumer preference.Consumers are also willing to pay premium prices for these products. Specialty eggs, thus, remain a focal point for CalMaine Foods’ growth strategy. It has earmarked $60 million in new capital projects for the expansion of cage-free capacity.The company is also expanding its product portfolio to include value-added egg products. This is evident in its investment in Meadowcreek Foods, LLC for hard-cooked eggs and Crepini Foods, a new venture offering egg products and prepared foods. CalMaine expects to leverage the Crepini brand of quality products, including egg wraps and protein pancakes, to extend its reach to major retailers.Ridgeland, MS-based CalMaine Foods is the largest producer and distributor of fresh shell eggs in the United States. The Zacks Consensus Estimate for CALM’s earnings for fiscal 2025 indicates year-over-year growth of 50%. CALM currently carries a Zacks Rank of 3.Andersons: Backed by its strong cash flow, the company continues to add to its core grain and fertilizer verticals, including a greater focus on renewables and opportunities in renewable diesel feedstocks. The renewables segment continues to deliver strong results and the current margin outlook remains strong. Production facilities operate efficiently with improved ethanol yield and lower operating costs, which is expected to boost margins.ANDE’s long-term capital projects to lower the carbon intensity of ethanol plants are expected to lead to positive financial results. ANDE recently made a $85 million investment for a 65% ownership interest in Skyland Grain, LLC, which operates a large grain and agronomy footprint and is spread across Southwest Kansas, Eastern Colorado and the Texas and Oklahoma panhandles. These assets extend ANDE’s geographic presence.Maumee, OH-based Andersons operates in trade, renewables and plant nutrient sectors in the United States and internationally. The Zacks Consensus Estimate for ANDE’s earnings for fiscal 2025 indicates year-over-year growth of 13.8%. The company has a trailing four-quarter earnings surprise of 43.2%, on average. ANDE currently carries a Zacks Rank of 3.Hydrofarm: The company is focused on streamlining operations, reducing costs and improving efficiencies. Aided by these efforts, HYFM has delivered gross margin expansion in five of the last six consecutive quarters.Major initiatives include narrowing the product and brand portfolio, relocating and consolidating certain manufacturing and distribution centers and selling assets related to the production of certain durable equipment products. Its strategic focus on proprietary brands continues to deliver mix benefits and operational efficiencies. The company has also been expanding its reach to serve non-cannabis controlled-environment applications, including food, floral and lawn and garden.Shoemakersville, PA-based Hydrofarm engages in the manufacturing and distribution of controlled-environment agriculture equipment and supplies in the United States and Canada. The Zacks Consensus Estimate for HYFM’s fiscal 2025 bottom line is pegged at a loss of 83 cents per share, indicating an improvement from the loss of $1.28 per share expected for 2024. HYFM currently carries a Zacks Rank of 3.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Andersons, Inc. (ANDE): Free Stock Analysis Report Cal-Maine Foods, Inc. (CALM): Free Stock Analysis Report Hydrofarm Holdings Group, Inc. (HYFM): Free Stock Analysis Report West Fraser Timber Co. Ltd. (WFG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks