Syngenta AG (SYT) is scheduled to report full year 2014 results on Feb 4, 2015. At the end of the first half of 2014, the company reported adjusted earnings of $3.12 per ADR, down 2% from the year-ago tally. Rising operational costs seemed to be the primary reason behind Syngenta’s year over year decline. Let scan factors that have driven its performance in the second-half of 2014
Factors to Persuade 2H 2014 Results
Syngenta is trying to improve its trade in the global forum on the back of strategic business initiatives, such as launching new products like Solatenol and Bicyclopyrone. By focusing on the improvement of its high-value chemistry and elite genetics technology, the company aims to achieve a target margin of 20% by the end of 2015.
Due to seasonal nature of its business, the company experience working capital outflow in the first half of its fiscal while generates enough cash in the second half. This being the second half, the company will generate adequate cash to be deployed in future growth initiatives
Further, the company expects sales growth within its integrated business in the second half of 2014. Also, backed by positive currency impacts, EBITDA will be favorably impacted by $20–$40 million in the second-half of 2014.
Syngenta’s commercial success is subjected to risks of political, social, economical and environmental uncertainties. At 2014-end, the company anticipated to incur expenditure worth $750 million on intangibles. The rise in expenditure came on the back of increased investment expenses to meet the booming demand in emerging markets. However, although such investments would definitely affect Syngenta’s margins in the fourth quarter, profitable returns are expected to be accrued over time.
Recent decline in oil prices have generated positive externalities for numerous agricultural stocks. Lower oil prices are expected to reduce the expenses of agricultural product marketing and eventually, lower the market prices of food items. However, if Syngenta would have failed to pull up or sustain demand for its product, a lower demand coupled with lower prices would have dampened its revenue.
Syngenta currently carries a Zacks Rank #4 (Sell). However, some better ranked stocks from the same industry worth considering are Cameco Corp. (CCJ), CF Industries Holdings, Inc. (CF), and Archer Daniels Midland Co. (ADM). While Cameco and CF Industries sport a Zacks Rank #2 (Buy), Archer Daniels Midland carries a Zacks Rank #3 (Hold).
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