Zacks Investment Research downgraded shares of Cosan Limited (CZZ) from NEUTRAL to UNDERPERFORM on April 12, 2013, with a target price of $18.00.
We have downgraded Cosan from Neutral to an Underperform recommendation. Costs have been increasing for the company over time and in the last reported quarter a hike of 29% in cost of sales and services and roughly 51% in selling, general and administrative expenses was registered. Apart from costs, long-term debt is also rising and more than doubled in the third quarter 2013. Further increases are likely to weaken margins and put pressure on the financials of the company. To add to the peril, Cosan faces risks from adverse weather conditions and rising competition in the industry. All these negatives have forced us to adopt a bearish stance on the stock. However, expectation of healthy production volumes, benefits from strategic acquisitions, growing sugar and ethanol demand, energy co-generation and transportation business cannot be ignored. In fact, these positives raise our hopes for a better future for Cosan.
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