Cosan Batted Around By Commodity And Macro Challenges, But The Core Investment Case Remains Solid

Despite high fuel and commodity prices, the last six months or so have been rather mixed for Cosan (NYSE:CSAN), with the ADRs of this large Brazilian conglomerate down around 5% since my last article and modestly underperforming the Brazilian stock market. Relative to other publicly-traded ethanol plays like Sao Martinho and Adecoagro (AGRO), though, the performance has been a fair bit better, as Cosan’s diversification in areas like lubricants, rail, and natural gas distribution have helped offset a roughly 25% - 30% decline in ethanol prices since April.

Cosan is always going to be a complex, challenging company to model and own – not only due to its participation in commodity markets, but also its holding company structure and diverse operations. That said, this management team has created value for shareholders over time, and I believe they will continue to do so. Between organic and inorganic growth opportunities, I continue to expect mid-to-high single-digit long-term revenue growth from Cosan and believe these ADRs should trade in the low-to-mid $20’s.

 

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Cosan Batted Around By Commodity And Macro Challenges, But The Core Investment Case Remains Solid