We recently maintained our Neutral recommendation on
), anticipating the company to perform in line with the broader
Cosan is a well known sugar and ethanol producer, this being its
core business. The company is also engaged in fuel and natural
gas distribution, logistics operations, lubricants and
specialties business, investments in agricultural land, and
corporate structure and other investments.
Diversified operations have helped Cosan expand its product and
services globally. The company has operations in Brazil and
Europe, besides countries in the Middle East, Asia and North
America. Also, efforts are being made to further strengthen the
product portfolio through acquisitions and long-term contracts or
agreements. The company's association with Camil and its stake
acquisitions in Comma, América Latina Logística (ALL) and
Serviços e Tecnologia de Pagamentos S.A. (STP) would undoubtedly
benefit the company.
Cosan has spent roughly R$2.2 billion in fiscal 2013 (Apr 2012 to
Mar 2013) and has allocated R$2.8 billion - R$3.0 billion for
capital spending in the calendar year 2013. Rebranding of Esso
stations to Shell brand, focus on new contracts and improved
services will aid Cosan in the quarters ahead.
Despite a compelling long-term growth prospect, we prefer to
remain on the sidelines for Cosan.
In the third quarter 2013, sugar production was down 1% and
crushed sugar volume decreased 2% due to unfavorable weather
conditions. Radar revenue was down 23% due to lack of property
sales during the quarter. Costs and expenses grew significantly
to erode many of the benefits from revenue increases. Also,
results were negatively impacted by foreign exchange variations
losses, unrecorded deferred fiscal credits and higher financial
expenses due to increase in debt levels.
Near-term risks including adverse weather conditions, rising
competition, higher cost of sales and operating expenses as well
as rising long-term debt might prove detrimental to the company's
Other Stocks to Consider
Cosan currently has a market capitalization of $3.7 billion and
carries a Zacks Rank #2 (Buy). Other stocks worth considering in
the industry include
The Andersons, Inc.
Otter Tail Corporation
). While The Andersons carries a Zacks Rank #1 (Strong Buy),
Exelon Corporation and Otter Tail both hold a Zacks Rank #2
ANDERSONS INC (ANDE): Free Stock Analysis
COSAN LTD-A (CZZ): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
OTTER TAIL CORP (OTTR): Free Stock Analysis
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