CHS Inc. (Cenex Harvest States) has announced stellar earnings for the quarter.
The huge cooperative (not publicly traded) showed great revenue gains as well as pretty spectacular earnings. Revenue was up 50% to $10.9 billion while earnings rose 40% to $274 million from $97 million a year ago.
No doubt much higher agricultural commodity prices, as well as increased margins in their oil refinery business, contributed greatly to their success on the quarter.
The earnings report can be found here.
As most you know CHS has 5 high yield perpetual preferreds outstanding–all trading at sky high prices. They can be reviewed here.
Congrats to all of you that were believers in their management. They must have a good hedging program in place to manage upstream costs, alomng with some pass thru pricing, maybe ag support payments too. Pretty complicated algo.
Speaking of commodity prices and hedging, continue to short Corn. I am in Iowa and NE and the corn is robust everywhere; I know it had been sky high. Just a little ag report from Papillion. The economy os ripping along up here too.
The “best” YTW among the 5 CHS preferred is sub 3%. CHSCP is negative. The clean price of CHSCP is a dollar more than the sum of all remaining dividends until first call date. Yeah, I know it’s a co-op but are you that sure it won’t be called? Even co-ops will call 8% issues.
CHSCP had its original maturity date pushed out a few years ago – not sure exactly when. Word was that because it was a co-op and CHSCP was mostly held by its member-farmers, they did it as a benefit to their members.
If one feels that CHS will do this again, then buying, even at this price, could be contemplated.
I held CHSCP through the first event, but recently sold it just above $30. I have not decided whether to buy it back or not. I might well forgo this as an 8% yield is really high, CHS management might decide to call despite what their members feel.
Inspy – I have July, 2023 as call date for CHSCP. That’s what my neg YTW is based on. Do you have a different date?
I grant you that a co-op is less likely to call than others but paying 8% when you could probably get 4% is tough to do. Effectively, you are enriching preferred owners at the expense of “common ” owners. I’m fine with that but if I owned common rather than preferred I’d be squawking.
Bob-in-DE, I think you’re correct on that 2023 date. I don’t recollect off the top of my head, but sounds about right.
CHS does not issue Common Stock. And CHSCP was the very first issue they had ( have ). And it was offered to the farmer-members, that’s why it was an attractive rate and gave the members some skin in the game toward the success of their co-op.
So, I guess CHSCP would be the closest thing to a Common in this particular instance.
I do own CHSCL and CHSCM, so am a little hesitant to go in for CHSCP at this price. Suspect I will likely hold off, unless the price goes to a positive YTW ( which most probably will not happen )
Inspy – “common” was in quotes. I understand how co-ops work. I was a beneficial owner at one time in an ag co-op and we always referred to our ownership interest as “shares”.
My personal inclination is to stick with other CHS preferred series, and stay on the sidelines for CHSCP. From a financial standpoint, it would be a sound and responsible move for management to call and replace with a 5-6% coupon.