We issued an updated research report on the premium agricultural chemical company Syngenta AG SYT on Dec 11, 2015. The company is involved in manufacture, marketing and research of seeds and pesticides, aimed at enhancing crop yield and food quality. With a high brand value, Syngenta operates in more than 90 countries around the world. However, the company’s business is currently exposed to threats stemming from certain external headwinds.
Existing Business Issues
Concerns related to harsh weather, weak commodity prices, currency volatilities and tight credit conditions are weighing on Syngenta’s top-line results. Being multinational in nature, the company’s trade is also exposed to headwinds such as unfavorable government policies and currency fluctuations. For instance, appreciation of the U.S. dollar, with respect to Euro and other currencies used in the Commonwealth of Independent States, is adversely affecting the company's international sales.
At the same time, the company's genetically modified traits are often subjected to risks of getting banned by governments of other countries. Moreover, the global agricultural industry is exposed to cyclical fluctuations led by changing climatic conditions. As a result, Syngenta’s top-line results remain sensitive to the unfavorable upswings and downswings of the global agro industry.
A Few Avenues
We anticipate the above-mentioned negatives to continue weighing on this Zacks Rank #4 (Sell) stock’s top- and bottom-line results in the near term. Nevertheless, certain tactical initiatives undertaken by the company might partially offset the impact of such adversities. Despite an unfavorable trading environment, Syngenta aims to achieve better results with the help of improved liquidity. By 2018, the company targets an EBITDA margin of 24–26%. The company also expects to generate roughly $2.7 billion in revenues in the second half of the current year, backed by benefits reaped from sound product as well as process innovation programs.
Stocks to Consider
Syngenta currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Akzo Nobel N.V. AKZOY, Flexible Solutions International Inc. FSI and The Dow Chemical Company DOW. All three stocks hold a Zacks Rank #2 (Buy).
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