Af Rob Hales, CFA, Morningstar aktieanalytiker.
Wide-moat Novozymes reported a disappointing first quarter with negative 4% organic growth. The company guided for negative growth in the first quarter, but growth in Bioenergy was worse than expected due to flooding in the U.S. Midwest, which took a major toll on customers. Volume lost is not expected to be fully recovered during the year. Consequently, Novozymes trimmed the top end of its 2019 organic growth guidance to 3%-5% from 3%-6%. We were already conservative on the year with our expectation for 3.8% organic growth, so we don’t expect to make any major changes to our forecast or our DKK 285 fair value estimate. At current levels, the shares look fairly valued.
A mid-single-digit percentage drop in organic growth is rare for Novozymes. However, the stock is only down 2% intraday, which we think reveals two things. First, the market shares our skepticism on the high end of growth guidance for the year. Second, the sharp decline in Bioenergy growth (down 8%) was a legitimate one-time event. A high concentration of Novozymes’ Bioenergy customers are located in the U.S. Midwest. In mid-March, the U.S. Midwest was hit by a major snowstorm, followed quickly by rising temperatures and significant rainfall. This resulted in flooding, which had a major negative impact on production for Novozymes customers. According to the Energy Information Administration, U.S. ethanol production was down 3%-4% in the first quarter. However, Novozymes estimates its customers' volume was down 7%-8%. While we don’t doubt the one-off nature of this event, U.S. ethanol producers were already somewhat strained by high inventories and low margins. While inventories have fallen due to the production impact from the flooding, they remain at a high level and therefore the lost volume is not expected to be recovered later in the year.
Bulls
- Novozymes nye friskheds- og hygiejneplatform burde puste nyt liv i husholdningssegmentet.
- Udrulningen af det nye podestof til majs kan drive tocifrede vækstrater i landbrugssegmentet i adskillige år frem.
- Selskabet anvender sit cash flow til aktionærvenlige tiltag såsom aktietilbagekøb og voksende udbytter.
Bears
- Novozymes vil have svært ved at nå tidligere års vækstrater, hvis det nuværende miljø med lave olie- og råvarepriser fortsætter.
- Der har manglet innovation af nye enzymer til bagning, som ellers er et af selskabets større forretningssegmenter.
- De lovgivningsmæssige risici for det amerikansk-fokuserede bioenergi segment er taget til under Trump-administrationen.
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Alle estimater og vurderinger er pr. 24. april 2019 af Rob Hales, CFA, aktieanalytiker hos Morningstar.
Rob Hales har ingen positioner i de omtalte værdipapirer.
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