The Stock Benefiting From Brazil's Currency Devaluation

• Bunge Ltd BG shares have plunged 25 percent year-to-date, and are trading close to the lower-end of their 52-week range of $67.06 - $93.17.
• Credit Suisse’s Robert Moskow upgraded the rating for the company from Neutral to Outperform, while reducing the price target from $88 to $85.
• While there are concerns about the volatility of the business and the company’s capability to meet long-term targets, Moskow expects the company to gain from the weaker Brazilian currency.

Analyst Robert Moskow believes that Bunge’s shares are a good buy for investors with a short-term investment horizon, just ahead of the company’s 3Q results. Shares of Bunge and other agribusinesses have declined substantially over the past few weeks due to concerns over the Brazilian currency devaluation.

Moskow pointed out, however, that the weaker Brazilian real is a “net positive” for Bunge in the region, unlike to the other agribusiness companies. “We continue to harbor concerns about the volatility of the business and its ability to achieve its long-term targets, but we think the dislocation in the stock presents an interesting near-term opportunity,” he added.

Brazilian farmers have increased the sale of their crops due to the weaker currency. The company can benefit from this by “locking in sales and attractive margins” possibly through the spring season in 2016. Moskow noted further that, given its export capabilities, the company would benefit with global trade moving to Brazil and away from the US, due to the stronger USD.

The weak currency has resulted in Brazilian consumers using cheap edible oil products and has affected the company’s ability to price in the higher cost of imported wheat.

“Management already guided investors to expect a down year for profits, but we have reduced our estimates further to account for further deterioration,” the Credit Suisse report stated.