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Syngenta Downgraded to Hold on Agro-Industry Headwinds

On Apr 13, 2016, Zacks Investment Research downgraded Syngenta AG SYT to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).

Why the Downgrade?

Syngenta has implemented a new Accelerating Operational Leverage program to generate adequate free cash flow to finance future investment plans. By 2018, Syngenta expects to save up to $1 billion and estimates an EBITDA margin of 24–26% through the above-mentioned program. The company also plans to strengthen its product portfolio to boost revenues in the upcoming quarters.

Moreover, Syngenta trades in the global energy-intensive agricultural sector. Low energy resource prices have generated positive externalities for numerous agricultural stocks. Weak oil prices should reduce expenses of agricultural product marketing and eventually lower the market prices of food items. Under such circumstances, agricultural companies such as Syngenta would experience greater demand for its products, thereby generating higher revenues and earnings in the future.

However, the recent rank downgrade reflects the stock’s impending industry specific business issues. Syngenta anticipates both its top line and bottom line to be adversely affected by factors like unfavorable weather, low commodity prices and tight credit conditions in the agricultural sector. Additionally, we expect a strong U.S. dollar to weigh on the company’s international revenues and margins in the near term.

Stocks to Consider

Some better-ranked stocks in the industry include Limoneira Company LMNR, Alamos Gold, Inc. AGI and AngloGold Ashanti Ltd. AU. All the three companies hold a Zacks Rank #2 (Buy).

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ANGLOGOLD LTD (AU): Free Stock Analysis Report
 
SYNGENTA AG-ADR (SYT): Free Stock Analysis Report
 
LIMONEIRA CO (LMNR): Free Stock Analysis Report
 
ALAMOS GOLD INC (AGI): Free Stock Analysis Report
 
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