Executive Summary / Key Takeaways

• Corteva delivered a strong start to 2025, with Q1 operating EBITDA increasing 15% and margins expanding by nearly 400 basis points, demonstrating the effectiveness of its operational execution and focus on controllable costs and growth platforms.
• The company's strategic shift towards becoming a net technology out-licenser is gaining significant traction, particularly with Enlist E3 soybeans and PowerCore Enlist corn, contributing to royalty income improvement and margin enhancement.
• Corteva remains firmly on track to achieve its target of $400 million in net cost improvements in 2025, driven by productivity gains, lower raw material costs, and footprint optimization, providing a significant tailwind for future profitability.
• Full year 2025 guidance remains reaffirmed at an operating EBITDA midpoint of $3.7 billion and a free cash flow to EBITDA conversion rate of 40-45%, reflecting confidence in the company's internal levers despite anticipated currency headwinds and competitive market dynamics.
• The company's integrated Seed and Crop Protection portfolio, underpinned by a robust R&D pipeline and differentiated technologies, positions it favorably against competitors, enabling continued market share gains and value capture, especially in key growth markets like Brazil.

Setting the Scene: An Agricultural Powerhouse Forged Through Transformation

Corteva, Inc. stands as a global pure-play agriculture company, a distinct entity born from the complex corporate realignments of DowDuPont. Its history is rooted in the agricultural businesses of the former E. I. du Pont de Nemours and Company (EIDP) and The Dow Chemical Company, culminating in the 2017 merger and subsequent 2019 spin-off. This journey shaped Corteva into its current form, focused intently on providing farmers worldwide with advanced seed and crop protection solutions.

The company operates through two primary segments: Seed and Crop Protection. The Seed segment is a leader in developing and supplying commercial seed, leveraging advanced germplasm and traits to enhance yield. It holds strong positions in key global markets, including North America, Europe, and Latin America. The Crop Protection segment offers a broad portfolio of products designed to protect crops from pests, weeds, and diseases, supporting overall crop health and productivity. This segment is a significant player in global herbicides, insecticides, and the rapidly growing biologicals market.

Corteva's overarching strategy centers on driving value creation through innovation, commercial execution, and rigorous financial discipline, particularly by "controlling the controllables." This involves leveraging its integrated portfolio, investing heavily in R&D, optimizing its operational footprint, and strategically managing costs and working capital.

The Engine of Growth: Technological Differentiation and Innovation

At the heart of Corteva's competitive strength lies its differentiated technology. In the Seed segment, this is built upon decades of germplasm development and proprietary trait technologies. Key examples include the Enlist E3 soybean technology, which has achieved remarkable penetration in the U.S. market (over 65% of acres in 2024), and PowerCore Enlist corn traits. These technologies offer farmers tangible benefits, such as improved weed control, insect resistance, and enhanced yield potential. While specific, universally comparable quantitative yield advantages over all competitor products are not detailed for every technology, the company consistently highlights that its advanced genetics and traits deliver incremental yield and agronomic performance, which translates directly into economic benefits for growers. For instance, the new Pioneer brand Z-series soybeans, featuring Enlist traits, showed an average yield advantage of 2.7 bushels per acre over the company's prior generation A-series soybeans in 2023 trials, illustrating the continuous yield improvement embedded in Corteva's R&D.

The company's R&D engine is a critical component of its strategy, with significant investment (tracking towards 8% of sales for the full year 2024). This investment fuels a robust pipeline, including approximately 300 new seed hybrids and varieties planned for launch in 2025. Beyond near-term product launches, Corteva is developing groundbreaking technologies like hybrid wheat, targeting a 2027 launch with a potential peak revenue opportunity of $1 billion. Hybrid wheat aims to bring the yield and consistency benefits of hybridization, long established in corn, to the world's largest row crop by area, promising an initial yield unlock of 10-20%. The company's proprietary sterility system is key to this effort. Another notable initiative is the winter canola for biofuels pilot program in the U.S. South, which is gaining momentum and expected to expand significantly, offering farmers a profitable alternative crop option in partnership with Bunge (BG) and Chevron (CVX).

In Crop Protection, technological differentiation is driven by new active ingredients and formulations, as well as expansion into biological solutions. The company has secured over 150 new product registrations globally year-to-date, providing farmers with cutting-edge tools. The strategic investment in biologicals, partly through acquisitions like Stoller and Symborg, targets $1 billion in revenue by the end of the decade and complements the synthetic portfolio, offering unique solutions for crop health.

The "so what" for investors is clear: this technological leadership forms a competitive moat, enabling Corteva to command premium pricing, gain market share, and drive margin expansion. The transition to becoming a net technology seller, licensing its proprietary traits to other seed companies, is a strategic shift expected to generate significant royalty income ($65 million in benefits in 2025) and enhance profitability, moving towards royalty neutrality by the end of the decade, potentially ahead of schedule.

Performance and Operational Excellence

Corteva's recent financial performance reflects the impact of its strategic focus and the dynamic agricultural market. The first quarter of 2025 demonstrated strong execution, with operating EBITDA increasing 15% year-over-year to $1,189 million and operating EBITDA margin expanding by 390 basis points to nearly 27%. This was driven by a combination of factors: Seed pricing gains, Crop Protection volume growth (up 5% overall, with double-digit gains in new products and biologicals), net cost and productivity benefits, and net royalty improvement. Net sales in Q1 2025 were $4,417 million, down 2% year-over-year, primarily due to a 5% unfavorable currency impact, partially offset by a 2% increase in volume and a 1% increase in price.

Cost of Goods Sold saw a notable improvement, decreasing from $2,550 million in Q1 2024 to $2,342 million in Q1 2025. This was attributed to ongoing cost and productivity actions, Crop Protection raw material deflation, lower commodity prices, reduced net royalty expense, and favorable currency effects, partially offset by higher volumes and Seed production costs. Selling, general and administrative expenses increased modestly to $751 million in Q1 2025, driven by higher commissions and bad debt expense, while amortization of intangibles decreased to $162 million as some assets became fully amortized. Other income/expense improved significantly to $15 million in Q1 2025, benefiting from the absence of certain prior-year charges and lower net exchange losses.

Looking back at 2024, Corteva achieved a significant milestone by delivering 20% operating EBITDA margins for the first time, even as operating EBITDA remained flat year-over-year amidst challenging market conditions. Full year 2024 organic sales were up 1%, with Seed organic sales growing 4% (Price +3%, Volume +1%) and Crop Protection organic sales down 2% (Volume +3%, Price -5%). The company generated approximately $1.7 billion in operating free cash flow in 2024, a significant improvement, and returned about $1.5 billion to shareholders through dividends and share repurchases.

The company's focus on "controlling the controllables" has been a key driver of performance. In 2024, this program delivered nearly $500 million in self-help benefits, including $155 million in lower net royalty expense and $220 million from raw material deflation and productivity. For 2025, the target is even more ambitious, aiming for approximately $400 million in net cost improvements. These savings are expected to come from lower seed commodity costs, continued Crop Protection raw material deflation (weighted towards the first half), and productivity gains, including benefits from the Crop Protection Operations Strategy Restructuring Program, which is expected to contribute ~$180 million in run-rate savings by 2027.

Competitive Landscape and Strategic Positioning

The agricultural inputs market is highly competitive, with major global players like Bayer AG (BAYRY), FMC Corporation (FMC), UPL Limited, and Nufarm Limited, as well as numerous regional and specialized companies, including those focused on generics and digital solutions.

Corteva's competitive positioning is anchored in its integrated Seed and Crop Protection portfolio and its differentiated technology. Unlike specialists like FMC (primarily crop protection) or companies with less integrated offerings, Corteva provides a "full acre solution," leveraging synergies between its seed, trait, crop protection, and digital products. This integrated approach, combined with a high-touch customer engagement model, fosters strong brand loyalty, particularly for its Pioneer seed brand, which maintains the number one position in North America corn and soybeans.

Quantitatively, Corteva's operating EBITDA margin of nearly 27% in Q1 2025 and 20% for the full year 2024 demonstrates strong profitability, although comparisons with competitors vary by segment and year. While some competitors like FMC may exhibit higher cost efficiency in specific areas, Corteva's margin expansion is increasingly driven by its ability to capture value from its proprietary technology and execute on cost controls. The strategic shift to out-licensing is a direct response to the competitive landscape, allowing Corteva to monetize its R&D investments more broadly and accelerate the adoption of its traits across the industry, including by competitors' licensees.

In the Crop Protection market, Corteva faces pressure from generic competitors, particularly those sourcing from Asia. However, the company's focus on differentiated and new products, including biologicals and its Spinosyns franchise, allows it to command a premium over commodity offerings. The recent stabilization in generic pricing out of China is a positive sign for the overall market. Corteva's domestic manufacturing footprint for key franchises like Enlist and Spinosyns also provides a degree of resilience against certain trade policy impacts.

While competitors like Bayer have vast R&D resources and digital platforms, Corteva is actively investing in its own pipeline and digital solutions (like Granular, mentioned in news articles) to remain competitive. The company's investment in Corteva Catalyst and partnerships like the one with the Mark Cuban Foundation for AI bootcamps highlight its commitment to exploring new technologies and talent, essential for long-term competitiveness.

Corteva's competitive advantages lie in its leading germplasm, proprietary traits, integrated portfolio, strong brand recognition (Pioneer), and increasing ability to monetize its technology through out-licensing. Vulnerabilities include exposure to competitive pricing pressures in certain Crop Protection markets and potential impacts from external factors like trade policies and regional agricultural challenges.

Outlook and Guidance

Corteva has reaffirmed its full year 2025 guidance, signaling confidence in its ability to deliver growth despite anticipated market dynamics and currency headwinds. The company expects full year 2025 operating EBITDA to be in the range of $3.6 billion to $3.8 billion, with a midpoint of $3.7 billion, representing approximately 10% growth over the 2024 midpoint. Operating EPS is projected between $2.70 and $2.95 per share, a similar percentage increase at the midpoint, benefiting from higher earnings and a lower share count (driven by buybacks), partially offset by higher net interest expense.

The guidance is based on several key assumptions:

• A flattish global Crop Protection market in 2025, with low single-digit volume gains offset by low single-digit pricing headwinds. Corteva expects its Crop Protection business to outperform the market, with mid-single-digit organic sales growth driven by volume gains in new products and biologicals, although pricing is expected to remain under pressure, particularly in the first half.
• Continued strong performance in the Seed segment, with low single-digit pricing gains driven by demand for yield-enhancing technology and a projected 5% increase in U.S. corn planted area. Volume growth is expected from increased North America corn acres and share gains, as well as a potential rebound in Brazil's safrinha corn area.
• Significant net cost improvements of approximately $400 million in 2025, stemming from lower seed commodity costs, Crop Protection raw material deflation, and productivity initiatives.
• Royalty income improvement of approximately $50 million in 2025, driven by increased out-licensing of Enlist and PowerCore corn and Conkesta E3 soybeans.
• A currency headwind of approximately $275 million on operating EBITDA for the full year, primarily due to the Brazilian Real and Turkish Lira.
• No impact from potential tariffs is currently factored into the guidance, as the estimated direct cost ($50 million) is deemed manageable and mitigation efforts are ongoing.

The company anticipates that roughly 60% of sales and 80% of operating EBITDA will be delivered in the first half of 2025, reflecting the seasonal nature of the business and the timing of cost benefits. The strong Q1 performance has helped derisk the second half of the year, although execution in key markets like Brazil remains critical.

Corteva's 2025 outlook supports its recently announced 2027 financial framework, which targets $1 billion in incremental net revenues from growth platforms (out-licensing, new CP products, biologicals) and $1 billion in gross productivity/cost benefits, aiming for approximately 100 basis points of EBITDA margin growth per year through 2027.

Risks and Challenges

While the outlook is positive, several risks and challenges could impact Corteva's performance. The persistence of competitive pricing pressure in the Crop Protection market, particularly if generic pricing does not stabilize or if channel inventories remain elevated in certain regions, could negatively affect margins and profitability. Currency volatility, especially involving the Brazilian Real, poses a significant headwind to reported results.

Regional agricultural challenges, such as the impact of corn stunt disease on planted area in Argentina or adverse weather conditions in key growing regions, can affect seed volumes and crop protection demand. Geopolitical factors and trade policies, while currently assessed as manageable for direct costs, could disrupt supply chains or impact farmer economics and export markets, indirectly affecting demand for inputs.

Litigation and environmental liabilities, particularly those related to legacy EIDP businesses like PFAS, continue to pose potential financial risks, although the company has established accruals and indemnification assets based on current estimates and agreements like the MOU with Chemours (CC) and DuPont (DD). Regulatory hurdles, including potential delays in product approvals due to funding/staffing issues at government agencies, could impact the commercialization of new technologies. Finally, the previously disclosed material weakness in EIDP's internal controls related to intercompany cash flow classification highlights the importance of ongoing efforts to strengthen financial reporting processes.

Conclusion

Corteva has demonstrated a strong start to 2025, building on the operational and strategic momentum established in 2024. The company's core investment thesis is underpinned by its differentiated technology portfolio, particularly in seeds and emerging biologicals, its strategic shift towards becoming a net technology out-licenser, and its rigorous focus on controlling costs and driving productivity. These internal levers are expected to fuel double-digit operating EBITDA growth and meaningful margin expansion in 2025, positioning the company well to achieve its ambitious 2027 financial targets. While external factors such as competitive market dynamics in crop protection, currency fluctuations, and regional agricultural risks present challenges, Corteva's balanced portfolio, strong brand presence, and commitment to innovation provide resilience. Investors should monitor the execution of cost reduction initiatives, the pace of stabilization in the crop protection market, and the continued delivery of the technology pipeline, as these factors will be critical in determining the extent of value creation in the coming years. Corteva appears poised to leverage its strengths and navigate the evolving agricultural landscape, offering a compelling investment opportunity for those seeking exposure to a technology-driven leader in the sector.