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Why Bunge’s Limited Bottom Line Rose in 2Q16

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Price movement

Bunge Limited (BG) has a market cap of $9.1 billion. It rose by 6.7% to close at $65.35 per share on July 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 6.0%, 12.3%, and -2.9%, respectively, on the same day.

BG is trading 8.6% above its 20-day moving average, 5.2% above its 50-day moving average, and 5.8% above its 200-day moving average.

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Related ETFs and peers

The iShares Russell Mid-Cap Value ETF (IWS) invests 0.31% of its holdings in Bunge Limited. The ETF tracks an index of US mid-cap value stocks. The index selects from the bottom 80% of the Russell 1000, screening on value factors. The YTD price movement of IWS was 12.8% on July 28, 2016.

The iShares MSCI USA Value Factor (VLUE) invests 0.81% of its holdings in Bunge Limited. The ETF tracks an index of large-cap and mid-cap US equities. Stocks are selected and weighted using fundamental metrics (earnings, revenue, book value, and cash earnings), aiming for exposure to undervalued stocks in each sector.

The market caps of Bunge’s competitors are as follows:

  • BRF SA-ADR (BRFS): $12.3 billion
  • Archer-Daniels Midland (ADM): $26.2 billion

Performance of Bunge in 2Q16

Bunge Limited reported 2Q16 net sales of $10.5 billion, a fall of 2.8% compared to net sales of $10.8 billion in 2Q15. Sales from agribusiness and sugar & bioenergy fell by 2.8% and 8.2%, respectively. Sales from edible oil products and milling products rose by 2.3% and 3.2%, respectively, in 2Q16 compared to 2Q15.

The company’s gross profit margin and total segment EBIT (earnings before interest and tax) rose by 1.3% and 22.8%, respectively, in 2Q16 compared to the prior year period.

Its net income and EPS (earnings per share) rose to $109.0 million and $0.78, respectively, in 2Q16 compared to $72.0 million and $0.50, respectively, in 2Q15.

Bunge’s cash and cash equivalents and inventories rose by 33.3% and 33.6%, respectively, in 2Q16 compared to 4Q15. Its current ratio fell to 1.3x, and its debt-to-equity ratio rose to 2.0x in 2Q16 compared to a current ratio and debt-to-equity ratio of 1.5x and 1.7x, respectively, in 4Q15.

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Projections

The company has made the following projections for fiscal 2016:

  • EBIT for food & ingredients to be $10 million to $30 million higher compared to the prior year period
  • EBIT for fertilizer to be ~$30 million higher compared to the prior year period
  • EBIT for sugar & bioenergy to increase by $70 million to $80 million

Quarterly dividend

Bunge has declared a regular quarterly cash dividend of $0.42 per share on its common stock. The dividend will be paid on September 2, 2016, to shareholders of record at the close of business on August 19, 2016.

The company has also declared a quarterly cash dividend of ~$1.22 per share on its ~4.9% cumulative perpetual preference shares. The dividend will be paid on September 1, 2016, to shareholders of record at the close of business on August 15, 2016.

In the next part, we’ll take a look at Spectrum Brands (SPB).

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