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Bunge Global (NYSE:BG) late Thursday was upgraded to Buy from a previous investment rating of Hold by analysts at financial-services firm HSBC. They said the grain processor is poised for gains with improved soybean crush spreads, or the difference between the value of farmed soybeans and byproducts such as biodiesel fuel.
“Demand for soybean oil should remain strong in the near term (1.4 billion gallons of renewable diesel capacity online in the first half of 2024),” Wesley Brooks, analyst at HSBC, said in a February 8 report. “We see the potential for crush spreads to recover and earnings to surprise.”
HSBC had been concerned that Bunge (BG) would face more intense competition from companies such as Archer-Daniels-Midland (NYSE:ADM), which opened a new soybean crushing facility last fall.
The bank lowered its earnings estimate for Bunge (BG) to $9.39 a share from $11.33 a share in 2024. It also revised the estimate for 2025 to $10.40 a share from $10.45 a share previously, and set an estimate for 2026 of $10.36 a share.
“Our 2025 and 2026 estimates change only modestly as we had already expected margins to normalize, as new crush capacity, including from Bunge (BG), starts operations,” according to HSBC.
The bank cut its price target on Bunge’s (BG) stock to $105 a share from $122 a share previously, based on a discounted cash flow valuation.
“We view Bunge (BG) as attractively valued at 9.4 times price-to-earnings [ratio], an 18% discount to its 11.5 times historical average next-12-month price-to-earnings [ratio],” HSBC said.