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What Caused Bunge’s Legal Action against Egypt’s Grain Buyer?

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Price movement of Bunge

Bunge (BG) has a market capitalization of $8.1 billion. BG fell by 2.8% to close at $56.75 per share as of February 9, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are -2.9%, -14.2%, and -16.9%, respectively.

Technically, the stock has broken its support and is trading below all of its moving averages. Currently, BG is trading 6.8% below its 20-day moving average, 11.1% below its 50-day moving average, and 25.1% below its 200-day moving average.

The VanEck Vectors Agribusiness ETF (MOO) invests 3.0% of its holdings in Bunge. The ETF tracks a market-cap–weighted index of companies that generate more than 50% of their revenues in the agribusiness sector. The YTD price movement of MOO is -6.8% as of February 8, 2016.

The PowerShares Dynamic Food & Beverage ETF (PBJ) invests 2.7% of its holdings in Bunge. The ETF tracks a multifactor, tiered, equal-weighted index of US food industry stocks.

The competitors of Bunge and their market capitalizations are as follows:

  • Archer Daniels Midland Company (ADM) — $20.0 billion
  • BRF (BRFS) — $11.0 billion
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Bunge challenged Egypt’s state grain decision

Bunge has filed legal proceedings to challenge a decision by Egypt’s state grain buyer to reject a cargo of French wheat it had contracted to buy from Bunge.

Performance of Bunge in 3Q15

Bunge reported 3Q15 net sales of $10,787.0 million, a fall of 21.1% compared to net sales of $13,676.0 million in 3Q14. Its net income and EPS (earnings per share) fell to $229.0 million and $1.56, respectively, in 3Q15 compared to net income and EPS of $284.0 million and $1.90, respectively, in 3Q14.

Bunge’s PE (price-to-earnings) and PBV (price-to-book value) ratios are 18.9x and 1.4x, respectively, as of February 9, 2016.

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