CPO - Corn Products - Company Raises 2008 Earnings Guidance By 10%

Corn Products International saw profits rise 18% in the first quarter as the world's agricultural market remains hot. The company has beaten Wall Street estimates three out of the last four quarters by an average of 8.39%. Corn Products has a forward P/E of 14.28.

Full Analysis

Corn Products International, Inc. (CPO) is the largest producer of dextrose in the world and manufactures starches, high fructose corn syrups and glucose. The company, headquartered in Westchester, IL, provides a variety of ingredients to customers in 60 industries including food, beverages, pharmaceuticals, animal feed, corrugating, paper and textiles. The company has 35 plants in 15 countries.

Corn Products, a Zacks #1 Rank (Strong Buy), has three business segments: North America, South America and Asia/Africa.

The company's North America segment includes Canada, Mexico and the United States. CPO is the only North American corn refiner with full-scale starch and sweetener facilities in all three NAFTA countries.

In South America, Corn Products is among the largest corn refiners with operations in Argentina, Brazil, Chile, Columbia, Ecuador, Peru and Uruguay.

The company processes corn and tapioca in Asia/Africa with operations in China, Kenya, Pakistan, South Korea and Thailand. It also has licensing agreements in South Africa.

Corn Products Easily Beats Analysts' Estimates for the First Quarter

On Apr 22, Corn Products announced first quarter earnings and beat Wall Street estimates by 19.72%, or 14 cents a share. Net income rose 29% to $64 million, or 85 cents per share, compared to $50 million, or 66 cents per share in the year-ago quarter. Analysts expected 71 cents per share.

It was the ninth consecutive quarter of sales records. Net sales rose 22% to $931 million compared to $762 million in the first-quarter 2007. Sales rose in all three business segments: in North America sales were up 15%, in South America sales were up 36%, and in Asia/Africa sales grew 30% compared to 2007. Sales were higher mainly due to favorable pricing power.

Profit rose 18% to $173 million compared to $146 million in 2007 due to strong pricing actions and product mix in North and South America. Margins fell slightly to 18.6% from 19.2% a year ago.

The Company Raises 2008 Earnings Guidance By 10%

On the strength of the first quarter numbers, Corn Products is optimistic about the rest of 2008.

The company raised guidance for the year to the range of $2.90 to $3.15 from its earlier forecast of $2.65 to $2.85. CPO expects a 12% to 22% increase in earnings per share over 2007. The gain includes 5 cents from the company's holdings in CME Group. Net sales are expected to reach $4 billion compared to $3.39 billion in 2007.

"Our North and South American businesses should continue to drive our improved performance for the balance of 2008," said Sam Scott, chairman, president and chief executive officer of Corn Products International. "We still expect lower results in Asia/Africa due to the cost and volume challenges in South Korea we have previously discussed."

Corn Products also expects results in the first half of 2008 to be stronger than the second half, due to higher raw material costs.

Analysts Raise Estimates for the Second Quarter and the Full Year

Brokerage analysts scrambled to raise estimates after the company's guidance forecast and strong first quarter report.

Estimates for the second quarter rose 10 cents to 83 cents per share from 73 cents per share in just the last week. For the year, estimates rose to come in line with the company's guidance, rising 29 cents to $3.11 from $2.82 per share. That's at the higher end of the company's guidance range.

Analysts also expect earnings per share growth in 2008 of 20.23%.

Corn Products's 2008 P/E is 14.28, under the industry average of 18.33. Its price-to-book is 1.96. As an added bonus, the company currently has a dividend yield of 1.00%.

Content Courtesy: Zacks Investment Research

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