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Category: Stock Market and Bunge
Date: 13 February 2020 Stock Price: $55.02 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Bunge, a company that sources, processes and supplies oilseed and grain products and ingredients. The group continues to make significant losses
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About Bunge
Bunge (www.bunge.com, NYSE: BG) is a world leader in sourcing, processing and supplying oilseed and grain products and ingredients. Founded in 1818, Bunge's expansive network feeds and fuels a growing world, creating sustainable products and opportunities for more than 70,000 farmers and the consumers they serve across the globe. The company is headquartered in New York and has 31,000 employees worldwide who stand behind more than 360 port terminals, oilseed processing plants, grain silos, and food and ingredient production and packaging facilities around the world.
Overview of Bunge's 4th quarter 2019 earnings results
Numbers we are interested in: (for the quarter)
- Sales: $10.783 billion (down from $11.543 billion for the same quarter of the previous year)
- Net sales decreased by -6.58% over the last 12 months
- Cost of goods sold: $10.212 billion (up from $11.121 billion for the same quarter of the previous year)
- Cost of goods sold decreased by -8.17% over the last 12 months
- Net loss: -$68 million (up from -$74 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.48 (up from -$0.52 for the same quarter of the previous year)
- Number of shares in issue: 142 million (up from 141 million for the same period of the previous year)
- Cash and cash equivalents: $320 million
- Cash and cash equivalents per share: $2.25
- Cash and cash equivalents makes up 4.09% of Bunge's market capital
- Cash and cash equivalents makes up 1.75% of Bunge's total assets
- Trade accounts receivable: $1.678 billion
- Accounts receivable makes up 9.16% of Bunge's total assets
- Inventories: $5.013 billion
- Inventories makes up 27.5% of Bunge's total assets
- Total stockholders equity in Bunge: $6.030 billion
- Stockholders equity per share in Bunge: $42.46
- Bunge is trading at 1.29 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Bunge (NYSE: BG) management commentary on 4th quarter 2019 earnings and guidance
Greg Heckman, Bunge's Chief Executive Officer, commented, “We finished 2019 on a strong note, driven by solid operating performance and market conditions that moved in our favor during the quarter. The improvements we’ve made to our business and our more rigorous approach to risk management enabled us to adapt quickly and benefit from upside opportunities.
"As we look back across 2019, our team executed well despite the complex environment and the substantial changes that are underway at Bunge. Looking ahead to 2020, we will remain nimble and prudent in order to maximize the earnings potential of our global platform, while continuing to optimize our portfolio and operations."
"As we look back across 2019, our team executed well despite the complex environment and the substantial changes that are underway at Bunge. Looking ahead to 2020, we will remain nimble and prudent in order to maximize the earnings potential of our global platform, while continuing to optimize our portfolio and operations."
Outlook
Taking into account the current margin environment and lack of visibility into the back half of the year, we expect full-year 2020 EPS to be broadly in line with 2019, when excluding notable items, our gain on Beyond Meat and the depreciation benefit in the Sugar & Bioenergy segment.
In Agribusiness, full-year results are expected to be down from 2019. Actual origination, processing and distribution margins will evolve based upon the fulfillment of U.S.-China trade agreements, crop sizes and farmer commercialization.
In Food & Ingredients, full-year results in Edible Oils and Milling are expected to be similar to the prior year, excluding approximately $13 million of favorable Q4 timing differences, which are expected to negatively impact 2020.
In Fertilizer, full-year results are expected to be down from a particularly strong prior year and more similar to 2018.
In Sugar and Bioenergy, market fundamentals have improved vs. 2019, driven by sustained Brazilian ethanol market prospects and better sugar prices.
Additionally, the Company expects the following for 2020: an adjusted annual effective tax rate in the range of 19% to 23%; net interest expense of approximately $230 million; capital expenditures in the range of $400 to $450 million; and depreciation and amortization of approximately $465 million.
Taking into account the current margin environment and lack of visibility into the back half of the year, we expect full-year 2020 EPS to be broadly in line with 2019, when excluding notable items, our gain on Beyond Meat and the depreciation benefit in the Sugar & Bioenergy segment.
In Agribusiness, full-year results are expected to be down from 2019. Actual origination, processing and distribution margins will evolve based upon the fulfillment of U.S.-China trade agreements, crop sizes and farmer commercialization.
In Food & Ingredients, full-year results in Edible Oils and Milling are expected to be similar to the prior year, excluding approximately $13 million of favorable Q4 timing differences, which are expected to negatively impact 2020.
In Fertilizer, full-year results are expected to be down from a particularly strong prior year and more similar to 2018.
In Sugar and Bioenergy, market fundamentals have improved vs. 2019, driven by sustained Brazilian ethanol market prospects and better sugar prices.
Additionally, the Company expects the following for 2020: an adjusted annual effective tax rate in the range of 19% to 23%; net interest expense of approximately $230 million; capital expenditures in the range of $400 to $450 million; and depreciation and amortization of approximately $465 million.
Bunge Limited (NYSE:BG) stock price history
The image below obtained from Google, shows the stock price history of Bunge Limited over the last 5 years. And its not been a good time for Bunge Limited at all. 5 years ago the stock of Bunge was trading at around $88.20 a stock and its currently trading at $55.02 a stock. That's a loss of -37.6% suffered by Bunge stockholders over the last 5 years.
The stock of Bunge is trading at a lot closer to its 52 week high of $59.65 than it is to its 52 week low of $47.29 a stock, which to us is a clear indication that the short term sentiment and momentum of Bunge stock is positive at this point in time,
The stock of Bunge is trading at a lot closer to its 52 week high of $59.65 than it is to its 52 week low of $47.29 a stock, which to us is a clear indication that the short term sentiment and momentum of Bunge stock is positive at this point in time,
Recent coverage of Bunge Limited
The extract below discusses the latest regarding Bunge as obtained from TheStreet.com
COUNCIL BLUFFS, Iowa, Jan. 2, 2020 /PRNewswire/ -- Southwest Iowa Renewable Energy, LLC (" SIRE") and Bunge North America, LLC ("Bunge") announced that SIRE repurchased Bunge's Series B membership units effective December 31, 2019. The purchase was made under the terms of the Bunge Membership Interest Purchase Agreement and ends Bunge's 13-year ownership interest in SIRE. As part of the transaction, the two Series B directors appointed by Bunge, Andris Martin and Brett Caplice, resigned from the SIRE board. In addition, the two companies revised commercial agreements.
Karol King, SIRE's Chairman, stated, "Since we first partnered in 2006 and in the following years, through construction and ethanol industry challenges, Bunge has been an invaluable partner for SIRE. In particular, SIRE benefitted throughout the years from commercial agreements for corn origination and products and in having two Bunge board members, who provided international agribusiness insight to our business." Mr. King continued, "SIRE is very pleased today to be in the position to go forward as an entity wholly-owned by our farmer and community members, with Bunge's ongoing support for our ethanol marketing."
Read the full article here
COUNCIL BLUFFS, Iowa, Jan. 2, 2020 /PRNewswire/ -- Southwest Iowa Renewable Energy, LLC (" SIRE") and Bunge North America, LLC ("Bunge") announced that SIRE repurchased Bunge's Series B membership units effective December 31, 2019. The purchase was made under the terms of the Bunge Membership Interest Purchase Agreement and ends Bunge's 13-year ownership interest in SIRE. As part of the transaction, the two Series B directors appointed by Bunge, Andris Martin and Brett Caplice, resigned from the SIRE board. In addition, the two companies revised commercial agreements.
Karol King, SIRE's Chairman, stated, "Since we first partnered in 2006 and in the following years, through construction and ethanol industry challenges, Bunge has been an invaluable partner for SIRE. In particular, SIRE benefitted throughout the years from commercial agreements for corn origination and products and in having two Bunge board members, who provided international agribusiness insight to our business." Mr. King continued, "SIRE is very pleased today to be in the position to go forward as an entity wholly-owned by our farmer and community members, with Bunge's ongoing support for our ethanol marketing."
Read the full article here
Bunge Limited (NYSE: BG) stock valuation
So what do we value Bunge stock at after the release of their 4th quarter 2019 earnings? It is hard to value a loss making firm and a firm that uses cash in operations instead of generating cash from operations. Our base position when a firm is loss making and burns cash is to use the stockholders equity per share as a base for our valuation. Based on this we have a target (full value) price of Bunge at $42.46 a stock. We therefore believe that the stock of Bunge is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $42.46. Therefore we believe a good entry point into Bunge stock is at $38.21 or below. We expect the stock of Bunge to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
We therefore rate Bunge as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $42.46. Therefore we believe a good entry point into Bunge stock is at $38.21 or below. We expect the stock of Bunge to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
We therefore rate Bunge as a sell
Next earnings release of Bunge Limited
It is expected that Bunge will publish their 1st quarter 2020 earnings report in early May 2020