Here's Why You Should Add Cosan (CZZ) To Your Portfolio

By Zacks Investment ResearchStock MarketsNov 14, 2017 08:26PM ET

www.investing.com/analysis/heres-why-you-should-add-cosan-czz-to-your-portfolio-200265411

Here's Why You Should Add Cosan (CZZ) To Your Portfolio

By Zacks Investment Research | Nov 14, 2017 08:26PM ET

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SHEL

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IFF

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MON

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We believe that Cosan Limited (NYSE:CZZ) is a solid choice for investors seeking exposure in the agriculture space. The company’s strengthening foothold in the sugar and ethanol business, initiatives to enhance productivity and efficiency and strengthening of distribution network bode well.

The stock has been upgraded to a Zacks Rank #1 (Strong Buy) on Nov 11.

In the last three months, the American Depository Receipts of this agriculture products company have yielded 7.3% return, outperforming 0.8% decline recorded by the industry.

Why the Upgrade?

Cosan performed well in third-quarter 2017, marking this as the second consecutive quarter of quarterly profits. Adjusted net income increased remarkably from the year-ago tally on the back of revenue growth and a fall in financial expenses. Fuel volumes sold in the quarter jumped 4.2% year over year on the back of growth in gasoline and diesel volumes sold. Sugar volume sold grew 16.7% and ethanol volume sold increased 27.3% year over year.

For the Raizen Energia segment, Cosan anticipates volume of sugarcane crushed to be within 59-63 million tons for the crop year April 2017-March 2018. Volume of energy sold is expected to be within 2.2-2.4 million MWh, up from the previous expectation of 2-2.2 million MWh. Also, for the Comgas segment, the company anticipates volume of gas sold to fall within 4.3-4.4 million cbm, above the previous projection of 4-4.3 million cbm for 2017.

In the quarters ahead, we believe that Cosan’s initiatives to improve its production capabilities and services will enable it to capitalize on the growing sugar and ethanol demand. The Comgas business will gain from recovery in industrial activity in the country, increasing industrial applications of natural gas and expansion in networks. Moove will benefit from its customer base in Brazil while will expand internationally to tap business opportunities. Rumo will gain from investments to strengthen its rail yards, terminals and rail lines as well as from its cost reduction efforts.

Cosan’s Raizen business will likely gain from its network of Shell (LON:RDSa) branded service stations, roughly 6,138 at the end of the third quarter. Also, Raizen’s efforts to enhance distribution network, improve efficiency and selective positioning of logistics will aid growth.

The stocks’ earnings estimates for 2017 and 2018 have been revised upward in the last 30 days. Currently, the Zacks Consensus Estimate stands at 98 cents for 2017 and $1.81 for 2018, up from their estimates 30 days ago of 31 cents and 54 cents, respectively.

Cosan Limited Price and Consensus

Cosan Limited Price and Consensus | Cosan Limited Quote

Other Stocks to Consider

Cosan has a market capitalization of approximately $2.1 billion. Other stocks worth considering in the Zacks Basic Materials sector include Kraton Corporation (NYSE:KRA) , International Flavors & Fragrances Inc. (NYSE:IFF) and Monsanto Company (NYSE:MON) . While Kraton sports a Zacks Rank of 1, both International Flavors & Fragrances and Monsanto carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kraton’s earnings estimates for 2017 and 2018 improved over the past 60 days. Also, the company pulled off an average positive earnings surprise of 32.88% in the last four quarters.

International Flavors & Fragrances’ earnings estimates for 2017 and 2018 have been revised upward over the last 60 days. Also, the company delivered an average positive earnings surprise of 3.05% in the last four quarters.

Monsanto’s earnings estimates for fiscal 2018 and fiscal 2019 improved over the past 60 days. Average earnings surprise for the last four quarters was a positive 244.78%.

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Here's Why You Should Add Cosan (CZZ) To Your Portfolio

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