Zacks Investment Research downgraded Bunge Limited BG to a Zacks Rank #5 (Strong Sell) on Dec 11, 2015. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market over the next few quarters.
Why the Downgrade?
Market sentiments have been weak for Bunge Limited since the beginning of 2015, as evident from a negative year-to-date return of 28.9%. The stock’s financial performance in the last four quarters was lackluster, with an average negative earnings surprise of 23.48%. Last quarter, the company’s earnings of $1.24 per share lagged the Zacks Consensus Estimate of $1.57 per share.
Bunge Limited’s top-line performance was weak as revenues decreased 21.1% year over year due to sales decline in Agribusiness, Edible Oil Products, Milling Products, Sugar & Bioenergy and Fertilizer segments.
For 2015, Bunge Limited increased its tax rate to 28−30% from the previous rate of 26%; while decreasing its capital expenditure to $750 million from $875 million expected earlier. Over the last 60 days, the Zacks Consensus Estimate for the stock has fallen 10% to $5.15 per share for 2015 and 7.3% to $6.23 for 2016. Also, the Zacks Consensus estimate for fourth-quarter 2015 declined 10.9% to $1.71 per share.
Stocks to Consider
Bunge Limited currently has a market capitalization of $9 billion. Better-ranked stocks in the sector include Celanese Corporation CE, Innospec Inc. IOSP and International Flavors & Fragrances Inc. IFF. While Celanese Corporation and Innospec sport a Zacks Rank #1 (Strong Buy), International Flavors & Fragrances carries a Zacks Rank #2 (Buy).
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