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Zack’s Bear of the Day: Bunge

Bunge Limited (NYSE:BG) is a leading agribusiness and food company with integrated operations in about 40 countries. It is a global leader in oilseed processing, and grain & oilseed marketing. The company has four business segments 1) Agribusiness, 2) Sugar & Bioenergy 3) Food & Ingredients and 4) Fertilizers.

The company had its IPO in 2001 and has expanded though many significant acquisitions since then.

Disappointing Fourth Quarter Results

Net sales for the quarter were $13.9 billion, down from $16.4 billion in the same quarter, a year ago. Adjusted total segment EBIT was $409 million, which included ~$80 million negative mark-to-market hedging impact.

Adjusted earnings were $1.20 per share, down from $1.35 a share in the previous year quarter and significantly below the Zacks Consensus Estimate of $2.51 per share. This was the third quartrely miss by the company in 2014; the average quarterly negative surprise being 41.5%.

The results were negatively impacted by $80 million in mark-to-market charges related to their North American oilseeds business and hedge bunker fuel positions related to their ocean freight contracts.

The results were also hurt by soybean processing performance in China. While demand grew in the country, industry capacity also increased, leading to margin pressures. Foreign exchange volatility also impacted results.

These negatives more than offset the benefits the company derived from a large harvest in North America. Disappointing results led to a steep sell-off in shares.

Downward Revisions

After poor results, analysts have revised their estimates for the company sharply downwards. Current Zacks Consensus Estimates for the current and the next fiscal year are $6.45 per share and $6.56 per share respectively, down from $7.00 per share and $7.57 per share, 7 days ago.

The Bottom Line

As the company generates most of its revenues from its Agribuinesss segment, it remains vulnerable to commodity price weakness and foreign exchange volatility. Zacks Industry Rank for Agricultural Products Industry is currently 216 out of 265 (bottom 18%) . There is no Zacks Rank # 1 (Strong Buy) stock in this industry. It is safer for investors to avoid this industry for the time being.

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