NEW YORK — Credit Suisse on June 24 lowered its target price for St. Louis-based Bunge Ltd. to $125 from $140, citing a less “frothy” crush margin environment. The research firm also lowered its 2022 earnings-per-share estimate to $12.41 from $13.72. The cuts came following Credit Suisse’s meetings with Bunge management.
“We are now slightly below consensus of $12.86 but still above guidance for ‘at least $11.50’ of EPS,” Robert Moskow, research analyst at Credit Suisse, wrote in the June 24 report. “Rising natural gas prices in Europe and COVID lockdowns in China have put some incremental pressure on soy crush margins. However, crush margins in South America rebounded as expected in 2Q, cash crush margins in the US have held up better than what the falling board margins suggest, and the company continues to capitalize on alternative sourcing opportunities related to the Ukraine war. On a net basis, the year appears to be playing out largely as management expected.”
In its discussions with management, Credit Suisse said Bunge indicated the war in Ukraine created more opportunities than headwinds for 2022. Volatility led to opportunities for Bunge to utilize alternate origins of beans and oil to supply customers. However, it also created uncertainty among customers about the future availability of crops and vegetable oils, Credit Suisse said. The war also has caused a spike in natural gas prices, which has compressed crush margins in Europe, Credit Suisse noted.
“We view the war as another factor exacerbating the world’s tight supply-demand balance for soy products,” Mr. Moskow wrote. “Despite some progress by resilient Ukrainian farmers to plant their crops during the spring, management puts a low probability on the country’s ability to deliver the 20 million tonnes of grain that it normally exports into the global market. It will likely take years for the country to repair its infrastructure (roads and storage facilities) and clear mines from its seas and ports even if the war ended abruptly. The recent bombing of Bunge and Viterra’s port facilities will make it increasingly difficult for Ukraine to export grain out of the country.”