There's a lot more to Cosan Ltd. (CZZ)
than sugar, but plunging global sugar prices are dominating the story
at this Brazilian conglomerate and likely to continue to do so for the
time being. Although the company is executing well in its fuel
distribution, ethanol, gas, lubricant, and rail operations, sugar is a
significant source of earnings, and there is only so much management can
do to offset a global supply glut.
Even factoring
in the weak sugar price outlook, Cosan Ltd. shares look significantly
undervalued. Unfortunately, near-term sugar prices have long had a
disproportionate influence on how Cosan Ltd. shares trade, and I'm not
willing to just assume that's going to stop. Higher oil prices are
supporting the ethanol business and the Rumo rail operations are
performing much better, but it's going to take a more constructive
market sentiment toward Brazil in general and sugar for these shares to
get out of the doghouse.
Read the full article here:
Sugar Prices Have Soured The Cosan Story
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