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Société Générale Rated Ingredion as a ‘Hold’

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Sep. 9 2016, Updated 10:05 a.m. ET

Price movement

Ingredion (INGR) has a market cap of $10.1 billion. It rose by 0.51% to close at $139.64 per share on September 7, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.7%, 3.3%, and 46.9%, respectively, on the same day.

INGR is trading 2.4% above its 20-day moving average, 4.7% above its 50-day moving average, and 24.7% above its 200-day moving average.

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Related ETFs and peers

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 0.38% of its holdings in Ingredion. The ETF tracks a market cap–weighted index of stocks in the US consumer staples sector. The YTD price movement of FSTA was 8.6% on September 7.

The SPDR S&P 400 Mid-Cap Growth ETF (MDYG) invests 0.59% of its holdings in Ingredion. The ETF tracks a market cap–weighted index of growth companies culled from the S&P 400.

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

  • Archer Daniels Midland (ADM) — $25.2 billion
  • Bunge Limited (BG) — $8.9 billion

Ingredion’s rating

Société Générale has initiated the coverage of Ingredion with a “hold” rating.

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Performance of Ingredion in 2Q16

Ingredion reported 2Q16 net sales of $1.46 billion, a rise of 0.44% over the net sales of $1.45 billion in 2Q15. Sales of the North America and EMEA (Europe, the Middle East, and Africa) regions rose by 3.0% and 1.7%, respectively.

Sales of the South America and Asia-Pacific regions fell by 4.0% and 6.1%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin and operating income rose by 10.8% and 14.6%, respectively. It reported a restructuring charge of $13.0 million in 2Q16.

Its net income and EPS (earnings per share) rose to $117.2 million and $1.58, respectively, in 2Q16, compared with $106.7 million and $1.47, respectively, in 2Q15. It reported adjusted EPS of $1.73 in 2Q16, a rise of 13.1% from 2Q15.

INGR’s cash and cash equivalents and inventories rose by 12.2% and 6.7%, respectively, between 4Q15 and 2Q16. Its current ratio rose to 3.1x and its debt-to-equity ratio fell to 1.2x in 2Q16, compared with 2.6x and 1.3x, respectively, in 4Q15.

Projections

Ingredion (INGR) has made the following projections for fiscal 2016:

  • adjusted EPS in the range of $6.70–$6.90, which excludes acquisition-related and integration costs and impairment and restructuring costs
  • effective tax rate of ~30%–32%
  • cash generated from operations in the range of $725 million–$775 million
  • capital expenditures of $300 million

Next, we’ll discuss Hormel Foods (HRL).

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