Citi cites earnings pressure on Bunge stock of downgrade By Investing.com
on Thursday, Bunge Limited (NYSE: )'s stock rating was downgraded from Buy to Neutral by analysts at Citi, with a reduced price objective set at $114 from $125 previously.
The adjustment reflects concerns about continued pressure on revenue in the industry, particularly in North America. Factors contributing to this pressure include increased industrial capacity and slower-than-expected growth in demand from the US biofuels sector.
The analyst also pointed out that the upcoming acquisition of Viterra may not significantly increase Bunge's earnings per share (EPS) due to the current poor margin situation.
This view contrasts with the more optimistic expectations that were set when the acquisition was first announced. In addition, Bunge's capital expenditure plans for the coming years are expected to be much larger than previously thought.
Despite the reduction, there is still an expectation that Bunge's moves, including the acquisition of Viterra, planned capital projects, and share repurchase programs, will contribute to EPS growth over time.
These projections hold even if industry conditions show no signs of improvement. However, the expected profits are not enough to maintain a very good rating on the stock at this time.
In other recent news, Bunge Global SA reported strong adjusted EBIT for the second quarter of 2024 and positive margin conditions in certain areas.
The company also announced its progress in the regulatory approval process for its merger with Viterra, expecting to complete the transaction in the coming months.
Bunge's full-year EPS forecast is set at around $9.25, reflecting the company's commitment to strengthening its core businesses and rewarding stakeholders.
The company is also making strides in expanding its canola operations, harvesting more than 5,000 hectares of winter canola with plans to increase this to 35,000 hectares. In addition, Bunge tested a blockchain-based traceability platform for sustainable soy with CP Foods, demonstrating its focus on sustainability.
However, Bunge acknowledges a lack of capital and visibility in the future and predicts market changes that could squeeze margins. The company also reported lower bean meal shipments to Europe, although this led to tighter restrictions in that region.
Finally, Bunge's CFO, John Neppl, expressed confidence in the company's performance above expectations and their readiness to finance the Viterra deal. These are the latest developments in the company.
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