What: Shares of Bunge Limited (NYSE:BG), a leading agribusiness and food company with operations in roughly 40 countries, shed 18% on Thursday after the company fell short of fourth quarter estimates and acknowledged that 2016 would be a challenging year -- not exactly music to investors' ears. Bunge stock is now down 30% year-to-date.
So what: Weaker U.S. soybean margins and declining demand from Brazil for Bunge's margarine and wheat products were largely to blame for the fourth quarter miss. Excluding one-time items, Bunge recorded earnings of $1.49 per share, which was below the analyst consensus of $1.56 per share.
Just as glaringly rough as its earnings results was the company's revenue decline. Bunge logged sales of $11.1 billion during the fourth quarter, below estimates of $11.6 billion and far below the $13.2 billion it reported in the prior year period.
Now what: Unfortunately for investors, 2016 is likely to bring much of the same struggle for Bunge, as the company has very little pricing power for most of its products. The Brazilian economy is likely to keep shrinking, putting more pressure on its sales in the region. The company's U.S. results will continue to lag as long as increased global export competition remains a factor.
On the bright side, these issues are forcing the company to improve its operations -- Bunge expects to generate $125 million in savings in its agribusiness and food operations in 2016. It'll be another challenging year, but Bunge should be able to manage a year of slight earnings growth and return on invested capital in its core agribusiness and foods operations.