On Wednesday, BMO Capital Markets adjusted its outlook on Ingredion shares (NYSE:INGR), reducing the price target to $133 from $147, while maintaining a Market Perform rating. The revision follows Ingredion’s fourth-quarter earnings per share (EPS) of $2.63, which surpassed the $2.56 consensus, largely due to favorable tax effects. Despite the earnings beat, the company’s operating profit matched expectations. According to InvestingPro analysis, Ingredion is currently trading below its Fair Value, with the stock down nearly 7% in the past week.Want deeper insights? InvestingPro offers comprehensive analysis with 12+ additional exclusive tips for Ingredion, available in the Pro Research Report.
Ingredion has issued EPS guidance for 2025 in the range of $10.75 to $11.55, which encompasses the consensus estimates, although it might be on the conservative side. The guidance accounts for lower-than-anticipated operating income growth and suggests a potential 7% shortfall in first-quarter EPS compared to consensus. Trading at a P/E ratio of 12.7x and maintaining dividend payments for 28 consecutive years, the company shows strong fundamentals. Notably, the company’s guidance does not include any assumptions regarding potential tariffs or changes in food regulations.
BMO’s analyst cited these policy uncertainties as a reason for adopting a more conservative 12 times price-to-earnings (P/E) ratio, which influenced the lower price target. Despite the current risk factors, including rising net corn costs, which increased by 10% month-over-month in December, and the potential for trade and regulatory changes, BMO’s stance remains one of caution, opting for a wait-and-see approach regarding the potential policy impacts. InvestingPro data shows the company maintains a strong financial health score of 3.33 (rated as "GREAT"), with a comfortable current ratio of 2.6x.
The analyst also recognized Ingredion’s solid steady-state fundamentals, supported by ongoing volume recovery, accelerated cost savings, and significant growth projects, such as a $100 million investment in an Indianapolis plant and optimization efforts. Additionally, Ingredion’s strong cash position is expected to enable accretive capital deployment, with the company generating $1.1 billion in levered free cash flow over the last twelve months. The company’s successful execution across its portfolio and the growth in high-margin specialty products were also highlighted as positive factors. However, the near-term risk profile for Ingredion is considered higher due to the aforementioned cost pressures and policy uncertainty.
In other recent news, global ingredients solutions company, Ingredion, reported strong financial results for its fourth-quarter of 2024, with an adjusted earnings per share (EPS) of $2.65, surpassing both Stephens’ estimate of $2.54 and the consensus estimate of $2.57. However, the company’s quarterly revenue fell short of expectations, recording $1.8 billion against an estimated $1.82 billion. Analysts from Stephens and Oppenheimer adjusted their price targets for Ingredion to $150 and $167 respectively, while maintaining their ratings.
Recent developments indicate that Ingredion plans to cease operations at its Vanscoy, Saskatchewan manufacturing facility, anticipating a pre-tax non-recurring charge of approximately $66 million. This closure is part of a strategic review to streamline operations and focus on core areas of the business.
In the third quarter, Ingredion reported a 29% increase in adjusted operating income, marking its best performance for this period. Ingredion’s CEO attributed these results to strategic initiatives and operational efficiencies. Despite these achievements, the company expects mid-single-digit declines in net sales for 2024, excluding the impact of the South Korea business sale.
These recent developments reflect Ingredion’s ongoing efforts to balance growth, profitability, and strategic focus in a complex business environment.
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