Bunge stock outlook dims with weaker crush margins and limited near-term benefits

On Tuesday, Bunge Limited (NYSE:BG) stock, currently trading at $79.54 and near its 52-week low, experienced a shift in market sentiment as Barclays (LON:BARC) analyst Benjamin Theurer downgraded the company's rating from Overweight to Equal Weight. Accompanying the downgrade, the price target was also reduced from $115.00 to $95.00.

According to InvestingPro analysis, the stock appears undervalued despite having declined nearly 28% over the past six months. Theurer cited concerns over crush margins and biofuel demand, which are clouded by uncertainties related to the Trump administration's policies.

Theurer noted that while there could be some mitigating factors, such as a decrease in used cooking oil (UCO) imports from China, the potential negative impact on soy crush margins is likely to be significant. Trading at an attractive P/E ratio of 9.89 and maintaining a solid dividend yield of 3.42%, Bunge has demonstrated remarkable consistency with 25 consecutive years of dividend payments. He mentioned that Bunge's exposure to the weaker South American market is not expected to provide any advantages in the current year, although there might be a chance for recovery in the latter half of 2025.

The analyst's outlook suggested that if Argentina's foreign exchange issues are resolved and crop pricing increases due to inflation, there could be a more favorable environment for Bunge in the second half of the year. However, these potential improvements would not be enough to fully offset the current challenges faced by the company.

Bunge, a leading agribusiness and food company, has a significant presence in the South American market. Theurer's analysis indicates that while the company is navigating through a complex economic landscape, there is a possibility for conditions to improve later in the year.

Investors reacted to the new guidance from Barclays, adjusting their positions to reflect the updated expectations for Bunge's performance in the face of the outlined headwinds and potential market developments.

In other recent news, Bunge Limited has been in the spotlight due to several key developments. Citi analysts, led by Thomas Palmer, lowered the price target for Bunge from $94.00 to $86.00, maintaining a Neutral rating. This adjustment comes amid expectations of decreased profit due to narrower crush margins and refined oil spreads. Bunge's pending acquisition of Viterra, which is expected to close in early 2025, could potentially dilute Bunge's earnings per share (EPS) by more than $1.50 in 2025. However, the EPS forecast for 2024 remains unchanged at $9.39.

Bunge Global SA reported a decrease in its share capital by $61,469, reflecting the company's ongoing efforts to manage its capital structure effectively. Furthermore, Bunge expanded its share repurchase program by an additional $500 million, bringing the total available for share repurchases to approximately $1.3 billion.

Bunge's third-quarter earnings per share (EPS) decreased to $2.29 from $2.99 in the same period last year, mainly due to costs associated with its pending merger with Viterra. BMO Capital Markets and CFRA have both lowered their price targets for Bunge, citing uncertainties in the current environment.

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