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Is Bunge Expected to Report Lower Earnings in 1Q16?

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Earnings expected to fall

In this article, we’ll discuss analysts’ EPS (earnings per share) estimates for Bunge Limited (BG) as well as management’s outlook for 2016. Analysts are expecting Bunge’s adjusted EPS to be $0.79, compared to $1.58 in 1Q15. This represents a massive drop of 50%. The company has missed estimates in the last three quarters.

After a disappointing trend in the past few quarters with negative earnings growth, Bunge reversed the trend in 4Q15 by reporting EPS of $1.49, which represented growth of 24%. In 2015, EPS rose by 15%.

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Outlook for 2016

The company expects to achieve modest earnings growth in 2016. Management believes earnings will increase from 2015 levels, but it didn’t provide any particular guidance.
Analysts expect earnings will decline only in the first quarter of 2016. The company expects earnings will bounce back in the second half of 2016, making earnings positive for the year.

Dividends and share repurchases

In 2015, Bunge returned $549 million to shareholders through dividends and share repurchases. In 2014 and 2015, the company purchased a total of $600 million in shares. It has purchased an additional $100 million in shares in the first part of 2016. On March 1, the company declared a regular quarterly cash dividend of $0.38 per common share. This will be paid on June 2, 2016, to shareholders of record on May 19, 2016. Bunge has a dividend yield of 2.4% as of April 22. Management has increased the dividend at an average annual rate of 10.3% over the past five years.

Further, Bunge declared a quarterly cash dividend of $1.22 per share on its 4.9% cumulative convertible perpetual preference shares. This will be paid on June 1, 2016, to shareholders of record on May 15, 2016.

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The company’s M&A (mergers and acquisitions) expenditure totaled $392 million in 2015. This included the acquisition of a wheat milling business in Brazil along with a smaller transaction in the United States. The company’s capital expenditure for 2015 was $649 million due to both deferred and reduced spending.

Earnings estimates for peers

Bunge’s peers in the industry include Archer Daniels Midland (ADM), Campbell Soup (CPB), and Ingredion (INGR).

  • Archer Daniels Midland’s EPS for its fiscal 1Q16 are expected to fall by 39%.
  • Campbell Soup’s EPS for its fiscal 3Q16 are expected to rise by 4%.
  • Ingredion’s EPS for its fiscal 1Q16 are expected to rise by 7%.

To gain exposure to CPB, you can invest in the PowerShares S&P 500 Low Volatility Portfolio (SPLV) and the Guggenheim Defensive Equity ETF (DEF), which invest 2.3% of their combined holdings in the stock.

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