On Wednesday, Citi analysts, led by Thomas Palmer, adjusted their outlook on Bunge Limited (NYSE:BG), a global agribusiness and food company, by lowering the price target from $94.00 to $86.00 while maintaining a Neutral rating on the stock.
Trading at $77.81 and near its 52-week low, Bunge maintains an attractive P/E ratio of 9.7x despite recent challenges. The revision comes amid expectations of decreased profit due to narrower crush margins and refined oil spreads, similar to the situation with Archer-Daniels-Midland Company (NYSE:ADM).
The analysts noted that Bunge's pending acquisition of Viterra, expected to close in early 2025, could potentially dilute Bunge's earnings per share (EPS) by more than $1.50 in 2025. Despite this, the EPS forecast for 2024 remains unchanged at $9.39.
The company maintains a solid 3.5% dividend yield and has consistently paid dividends for 25 consecutive years. However, the projections for the following years have been altered, with the 2025 EPS estimate reduced to $8.53 from $9.63 and the 2026 estimate to $9.63 from $10.66.
Citi's valuation of Bunge takes into account the estimated contributions from Viterra, including synergies, but the EPS estimates themselves do not include Viterra. The firm's analysis suggests that the acquisition's impact on Bunge's earnings will be significant, prompting the adjustment in the price target.
According to InvestingPro's comprehensive analysis, Bunge maintains a GOOD overall financial health score, suggesting resilience during this transition period. The new target reflects the anticipated changes in Bunge's financial performance over the next few years, as the company integrates Viterra's operations and realizes potential synergies.
In other recent news, Bunge Global SA has reported a decrease in its share capital by $61,469, following a repurchase of shares. This development reflects the company's ongoing efforts to manage its capital structure effectively. Bunge Global also expanded its share repurchase program by an additional $500 million, bringing the total available for share repurchases to approximately $1.3 billion.
This expansion is part of the company's capital allocation strategy, which includes utilizing proceeds from the recent sale of its interest in a sugar and bioenergy joint venture.
The company's earnings per share (EPS) for the third quarter decreased to $2.29 from $2.99 in the same period last year, primarily due to costs associated with its pending merger with Viterra. Net earnings per share also fell to $1.56 from $2.47. Despite these declines, Bunge maintains a strong liquidity position and anticipates an adjusted EPS of at least $9.25 for the full year.
BMO (TSX:BMO) Capital Markets has lowered its price target for Bunge to $110 from $120, citing uncertainties in the current environment. Similarly, CFRA has reduced its price target from $109.00 to $90.00, maintaining a Hold rating on the stock.
The Viterra merger, which is expected to dilute Bunge's EPS in the first year, is now anticipated to close by the end of the year or early 2025. This is a delay from the prior guidance. As part of its repurchase plan associated with the Viterra deal, Bunge has repurchased $200 million in shares year-to-date.
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