uploads///Bunges Actual Earnings per Share versus Consensus Estimates

Bunge Missed Consensus Earnings Estimates by 21%

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Nov. 2 2015, Published 11:45 a.m. ET

Reported earnings per share

Bunge Limited (BG) reported earnings of $239 million and $1.24 per share in 2Q15. The company’s earnings fell badly compared to analyst estimates of $1.57. The company reported $1.31 in the corresponding quarter last year. The EPS was negatively impacted by a higher tax rate, as the company’s earnings mix has shifted towards its Brazilian agribusiness operation, which has a high marginal tax rate. Over the next five years, analysts that follow this company are expecting it to grow earnings at an average annual rate of 13.1%. This year, analysts are forecasting an earnings increase of 37.3% over last year. Analysts expect earnings growth next year of 17.3% over this year’s forecasted earnings.

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Share repurchase and the effect of acquisitions

Management also reported that during the third quarter, the company bought back $100 million of common shares, bringing the year-to-date total to $300 million while making progress on improving its winning footprint in its core businesses. The company also completed various acquisitions during the quarter including Brazilian wheat processor, Moinho Pacifico, and US specialty oil producer, Whole Harvest Foods. Pacifico is the largest port-based wheat mill in Brazil, which along with its new mill under construction in Rio de Janeiro, will allow the company to efficiently serve the growing needs of its customers as the Brazilian economy recovers. Whole Harvest Foods will expand Bunge’s North American specialty oil product offerings in the fast-growing natural ingredient category.

Bunge’s peers in the industry like Ingredion (INGR) and B&G Foods (BGS) reported an EPS of $1.64 and $0.34, respectively, during the last quarter. The Flex Shares Morningstar Global Upstream Natural Resources (GUNR) invests 1.4% of its portfolio in BG, and the PowerShares DWA Consumer Staples Momentum Portfolio (PSL) invests 1.7% of its portfolio in INGR.

Outlook for fiscal 2016

Looking ahead, Bunge expects over $1 billion in full-year Agribusiness EBIT (earnings before interest and taxes) and sequentially higher results in Food & Ingredients in the fourth quarter. The company expects its food businesses in Brazil to continue to experience challenges for the later part of the year, but its complete integrated oilseed and grain value chains in the country should produce full-year results that exceed last year. The sugar and bioenergy sector should finish the year with positive EBIT and free cash flow results. Demand for ethanol in Brazil has been strong. The recent gasoline price increases have been supportive to ethanol pricing, and the significant devaluation of the Brazilian real has returned Brazil to its traditional role as the world’s low cost sugar producer.

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