Investors who were willing or able to look past Delta and Pine Land's (NYSE: DLP ) disappointing second quarter and accept management's explanation that delayed orders were to blame are getting their reward today. Having largely treaded water after a big run-up early in the year, shares of this cotton and soybean seed specialist are reaching a 52-week high on solid third-quarter results.
Revenue jumped 41% this quarter, and though gross margins were a bit softer, overall operating performance was strong. In fact, if you're willing to look past (in other words, add back) a research and development charge related to an agreement with Syngenta (NYSE: SYT ) , operating income was up 42% this quarter.
The good news (and bad news) about Delta is that it focuses very intently on what it does -- breeding more advanced cotton seeds, and to a lesser extent, soybean seeds. That has led to a very strong market share (in the U.S. at least) for what is still a valuable cash crop, and the company is also looking to grow with continued expansion into India. On the flip side, its fortunes are obviously closely tied to cotton acreage, and it doesn't have the kind of diversification that Monsanto (NYSE: MON ) or Bayer (NYSE: BAY ) can use to smooth over a rough patch in one crop category.
While Delta has been busy solidifying its technology and product base (in recent agreements with Syngenta and DuPont (NYSE: DD ) ), I'm not sure what the future holds for an independent specialist in cotton (and soybeans). I think it's highly likely that Delta and Pine Land will eventually be purchased to become a subsidiary of one of the other, larger crop and chemical entities out there.
In the meantime, while this is a high-quality niche player with good market share, it's still a niche player. Moreover, it just doesn't look all that abundantly cheap today. Give me another swoon and I might change my tune, but for now, I'd likely be more interested in bigger players like Syngenta or Monsanto.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).