A Wall Street Journal report highlighted that prices of wheat, corn, and soybeans could remain volatile in 2023. This could adversely impact the margins of Bunge (NYSE:BG), which is engaged in the trading, processing, and shipping of food grains and crops across the globe.
Investors should note that food grain prices surged in 2022, benefitting from high demand and supply shortages stemming from Russia’s invasion of Ukraine and adverse weather conditions. This supported the margins of food processing companies like Bunge. However, according to the WSJ report, the prices of these grains reversed to where they were a year ago.
The report also highlighted that the Fed’s aggressive rate hikes to tame inflation could slow the economy and adversely impact demand. A moderation in demand and an uncertain price environment could hurt Bunge’s margins.
Is BG Stock a Buy?
While Bunge’s margins could come under pressure, UBS analyst Manav Gupta initiated stock coverage with a Buy recommendation. The analyst said that the market is focusing on margin compression but not considering Bunge’s solid EPS guidance for 2022.
During the Q3 conference call, Bunge raised its 2022 EPS outlook to $13.50 from $12. Further, Gupta added that BG is yet to get credit for its multi-billion-dollar capital plan.
Including Gupta, BG stock has received five unanimous Buys for a Strong Buy consensus rating. Meanwhile, analysts’ average price target of $129.80 implies 35.82% upside potential.
Along with analysts, hedge fund managers are also optimistic about BG stock. Hedge funds bought 67.7K BG stock in the last three months. Moreover, Bunge sports an Outperform Smart Score of nine.