We issued an updated research report on Cosan Limited (NYSE:CZZ) on May 20, 2016. The company is engaged in the cultivation, harvesting and processing of sugarcane, which is the main raw material used for producing sugar and ethanol.
Cosan is the world’s largest producer and processor of sugarcane, having crushed approximately 63 million tons of sugarcane during the Apr 2015−Mar 2016 period. The company constantly strives to improve its production capabilities and services, and its organic and inorganic growth initiatives have yielded results over time.
Notwithstanding these positives, Cosan’s exposure to certain headwinds has been restricting its momentum in the near term. The company’s international operations face risks from geo-political issues and foreign exchange variations. Also, unfavorable weather conditions and stiff competition can adversely impact the company’s profitability.
Mounting operating costs and interest expenses remain a major concern for Cosan. In first-quarter 2016, the company’s cost of sales increased 30% year over year while its operating expenses grew 18%. To add to the woes, the company is exposed to volatility in domestic and international supply and demand given the high cyclicality of the industry.
With a market capitalization of $1.5 billion, Cosan currently carries a Zacks Rank #3 (Hold). The ranking is justified as near-term concerns surrounding the stock seem to offset the promise of bright prospects. Some better-ranked stocks in the sector include Innospec Inc. (NASDAQ:IOSP) , POSCO (NYSE:PKX) and Universal Stainless & Alloy Products Inc. (NASDAQ:USAP) . While Innospec Inc. sports a Zacks Rank #1 (Strong Buy), both POSCO and Universal Stainless & Alloy Products carry a Zacks Rank #2 (Buy).
INNOSPEC INC (IOSP): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
UNVL STAINLESS (USAP): Free Stock Analysis Report
COSAN LTD-A (CZZ): Free Stock Analysis Report
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