On Monday, Barclays (LON:BARC) reiterated its Overweight rating on shares of Bunge Limited (NYSE:BG) with a steady price target of $115.00. The firm expects Bunge to announce its quarterly results on Wednesday, October 30th, with a scheduled conference call to discuss the earnings at 8 am ET.
The analyst from Barclays anticipates a year-over-year decline in profitability due to several factors impacting the business environment. These include lower sales, a sluggish supply situation, and reduced crush margins. The firm projects a 21% drop in operating income to $460 million and a 17% fall in EBITDA to $574 million. Average margins are expected to decrease by 65 basis points compared to the previous year.
A closer look at Bunge's segments reveals varying performance levels. The Agribusiness segment is expected to see a 32% decrease in adjusted EBIT and a 130 basis point contraction in margins. The Refined & Specialty Oils segment is likely to experience a 19% dip in profitability and a 90 basis point reduction in margins. On a more positive note, the Milling segment is forecasted to report a 22% improvement in adjusted EBIT.
The Non-Core segment, which includes assets that have been sold to Bunge's joint venture partner BP (NYSE:BP) as of October 1st, is predicted to show a significant decline in profitability.
Despite these challenges, Barclays expects a bottom-line boost from improved financing and a lower tax rate, leading to an earnings per share (EPS) estimate of $2.10 for Bunge.
In other recent news, Bunge Global SA has made several strategic moves. The firm is set to acquire Viterra Limited in a stock and cash deal, which has been approved by Bunge's shareholders and is currently awaiting regulatory approvals. This acquisition aligns with Bunge's long-term growth objectives and is expected to expand its reach within the agricultural commodities sector.
In preparation for this acquisition, Bunge initiated exchange offers for all outstanding notes from Viterra, totaling $1.95 billion. This move is expected to strengthen Bunge's global scale and enhance its offerings in the agribusiness sector.
Bunge has also finalized the sale of its 50% interest in BP Bunge Bioenergia to bp, as part of its strategy to streamline its portfolio and focus on its core agribusiness operations.
Despite a recent downgrade from Citi, which changed Bunge's stock rating from Buy to Neutral, the firm reported a robust adjusted EBIT for the second quarter of 2024 and updated its full-year adjusted EPS forecast to approximately $9.25.
Bunge and Archer-Daniels-Midland Co. are anticipating increased profitability due to a surge in crop sales by U.S. farmers. This could provide cheaper soybean ownership for both companies and help them utilize any excess manufacturing capacity.
InvestingPro Insights
Bunge Limited's current financial landscape aligns with Barclays' analysis, as reflected in recent InvestingPro data. The company's P/E ratio of 9.99 and adjusted P/E ratio of 8.42 for the last twelve months as of Q2 2024 indicate that Bunge is trading at a low earnings multiple, which could be attractive to value investors despite the anticipated earnings decline.
InvestingPro Tips highlight that Bunge has maintained dividend payments for 24 consecutive years and has raised its dividend for 4 consecutive years, showcasing a commitment to shareholder returns even in challenging times. This is particularly relevant given Barclays' expectation of a decline in profitability. The current dividend yield stands at 3.03%, which may provide some cushion for investors during this period of expected lower earnings.
The InvestingPro data also shows a revenue decline of 12.5% in the last twelve months as of Q2 2024, corroborating Barclays' projection of lower sales. Additionally, the EBITDA growth of -19.33% over the same period aligns with the analyst's forecast of a 17% fall in EBITDA.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Bunge Limited, providing a deeper understanding of the company's financial health and market position.
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