On March 25, Zacks Investment Research downgraded Syngenta AG (SYT - Analyst Report) to a Zacks Rank #5 (Strong Sell) due to disappointing results for the fourth quarter of 2013.
Why the Downgrade?
Syngenta reported earnings per share, excluding restructuring and impairment charges of $19.30 (or $3.86 per ADR), down 12.4% from $22.03 reported in 2012. The decline mainly resulted from increase in seed related costs that in turn affected margins.
Syngenta’s seed related costs increased in 2013, due to the drought experienced in the 2012 seed growing season, which affected the margins. Gross profit margin in the reported period fell 370 basis points (bps) year over year to 45.5%, on a constant exchange rates (CER) basis. EBITDA (earnings before interest, taxes, depreciation and amortization) margin in the reported year was 19.0%, down 290 bps year over year, on a CER basis.
Syngenta’s overseas operations expose it to foreign currency translation risks. In 2013, currency translation had a negative impact of roughly $238.0 million on revenues. The company expects to continue facing the brunt of an unfavorable currency environment in the emerging markets, in the upcoming quarters. Therefore, management expects to experience $50 million of adverse impact on EBITDA in 2014.
Following the results, the Zacks Consensus Estimate for earnings per share decreased 14.1% to $4.39 for 2014, while the same for 2015 declined 2.3% to $5.18 over the past 60 days.
Syngenta is involved in the manufacturing, marketing and research of seeds and pesticides, enhancing crop yields and food quality.
Other Stocks to Consider
Syngenta currently has a market capitalization of $34.1 billion. Some better-ranked stocks worth a watch in the industry include The Scotts Miracle-Gro Company (SMG - Snapshot Report), International Flavors & Fragrances Inc. (IFF - Analyst Report) and Rockwood Holdings, Inc. . All these stocks sport a Zacks Rank #2 (Buy).