Is Adecoagro stock still a Buy? Morgan Stanley weighs sugar slump By Investing.com

On Tuesday, Morgan Stanley adjusted its stance on Adecoagro S.A. (NYSE:AGRO), a leading agribusiness company, by downgrading its stock rating from Overweight to Equal-weight. Alongside the rating change, the firm also revised its price target for Adecoagro’s shares, reducing it to $12.50 from the previous $14.50.

The downgrade was based on a reassessment of the company’s financial outlook in light of lower sugar prices. Despite the downgrade, Morgan Stanley expressed a continued preference for Adecoagro over São Martinho S.A. (SMTO), which the firm downgraded to Underweight, citing Adecoagro’s higher Free Cash Flow (FCF) yields as a deciding factor.

Morgan Stanley’s analysis projected that Adecoagro’s FCF yield would range between 8.6% and 14.2%, significantly more favorable than São Martinho’s estimated FCF yield of 4.0% to 5.7%. This assessment considered both companies’ hedging positions and a scenario where sugar prices fall to $19 and $18 per pound.

The firm’s revised price target and stock rating reflect a cautious outlook for Adecoagro, factoring in the anticipated impact of the sugar market dynamics on the company’s financial performance. Morgan Stanley noted that their estimates remain below the consensus, suggesting a more conservative view of the company’s future earnings potential.

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