Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell) on Sep 10. Disappointing
second quarter 2013 results and a cut in full-year 2013 guidance
led to the downgrade.
Why the Downgrade?
On Jul 31, Ingredion, an ingredient solutions provider,
reported dismal second quarter 2013 results. Though earnings of
$1.20 per share beat the Zacks Consensus Estimate by 1.7%, it
declined 10% from the prior-year quarter.
The year-over year decline was due to weak operating income
and a challenging macro-economic environment, particularly in
South America, which has risen recently and difficult to offset
in the short-term. The company is also witnessing shrinking
margins in Argentina.
The company stated that growth in Argentina has been lower
than expected. The situation worsened with government policies
curbing Ingredion's ability to pass on higher raw-material prices
to customers. Besides Argentina, the current state of the
Brazilian economy also remains a concern.
The company had also cautioned its investors in May about the
anticipated weakness in the global economy, currency headwinds in
Brazil, Argentina and Pakistan and inflationary pressure.
Ingredion's sales of $1.633 billion lagged the Zacks Consensus
Estimate of $1.666 billion by 2% and were flat year over year as
price/mix improvements were offset by volume declines and
currency devaluations. Operating income also declined 17%
year-over-year on an adjusted basis to $140 million due to higher
costs and weaker volumes, particularly in South America.
Management remains positive on the long-term prospects as it
expects raw material prices to subside and improved volume
performance in key markets, owing to the company's sales and
operating income from capital investments. However, the economic
pressure faced in Argentina remains an overhang and is expected
to take a toll on full-year 2013 results.
Owing to sluggish second quarter results and a tough
macro-economic environment, the company reduced its earnings
guidance for 2013. Ingredion now expects earnings per share in
the range of $5.10 to $5.40 per share compared with the prior
range of $5.60 to $6.00 per share.
This maker of high-fructose corn syrup witnessed sharp
downward estimate revisions after announcing its second quarter
2013 results. All the estimates for the third quarter and 2013
declined over the past 60 days. The Zacks Consensus Estimate for
the third quarter decreased 17.5% and that for 2013 went down
10.4% over the last 60 days.
Other Stocks to Consider
Not all stocks are performing as poorly as Ingredion. Other
food companies that are worth considering are
Green Mountain Coffee Roasters, Inc
Pinnacle Foods Inc
Dole Food Co. Inc.
). While Green Mountain and Pinnacle Foods hold a Zacks Rank #1
(Strong Buy), Dole Food holds a Zacks Rank #2 (Buy).
DOLE FOOD CO (DOLE): Free Stock Analysis
GREEN MTN COFFE (GMCR): Free Stock Analysis
INGREDION INC (INGR): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
To read this article on Zacks.com click here.