Please ensure Javascript is enabled for purposes of website accessibility

The Look and Feel of Delta & Pine's Cotton

By Stephen D. Simpson, Simpson, – Updated Nov 15, 2016 at 5:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Delayed shipments hurt this quarter, but increased acreage estimates are good news.

Much as we prefer to see clearly defined good news/bad news stories, the realities of business aren't always so simple. That holds true for cottonseed specialist Delta & PineLand (NYSE:DLP). Missing guidance in the fiscal second quarter isn't good news, but higher management estimates for cotton acreage this year isn't so bad, either.

On their own, results this quarter were about as appealing as a handful of boll weevils. Sales were down 4% from last year, gross margins fell, and operating income dropped by 24% on higher expenses.

On the other hand, it's important to layer in some context for those results. The company experienced a shift in orders from this quarter to the next. What's more, management has revised its estimate for cotton plantings to "up 3%" from "flat." So if those delayed orders come through in the next quarter and these planting projections hold up, that should all be good news.

Of course, the pressures of competition can't entirely be ignored. Delta & Pine Land has good share in key growing regions like Texas, but don't dismiss the possible threats from a private-label offering from UAP Holding (NASDAQ:UAPH) or new licensees of Monsanto (NYSE:MON). And that's to say nothing of other rivals such as Bayer (NYSE:BAY), Syngenta (NYSE:SYT), and DuPont (NYSE:DD) -- some of which the company also works with through technology licenses.

I liked this stock back in early January, when I thought the markets were overreacting to bad news from what I believe to be an inconsequential quarter. Since then, though, the stock has had quite a nice run. I'm not really bearish on Delta -- I just think the easy money has been made. If you already own shares, I think you can still do OK, but I'm looking more at Monsanto, Syngenta, and UAP these days.

See what other seeds of wisdom we've planted in past Foolish takes:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
Monsanto Company Stock Quote
Monsanto Company
MON

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.