Illinois-based Corn Products International, Inc. (NYSE: CPO) stepped into the earnings spotlight this morning, with the food firm reporting first-quarter net income of $17 million, or 22 cents per share, down sharply from $64 million, or 85 cents per share, in the first quarter of 2008. Sales for the period fell 11% to $831.1 million.
The results were impacted by higher net corn costs, softer volumes, and foreign currency translations. Analysts were expecting significantly higher earnings of 49 cents per share, according to Thomson Reuters.
As if the wide earnings miss wasn't enough of a downside catalyst, CPO multiplied its negative momentum by slashing its outlook for the remainder of 2009. "We now anticipate lower volumes in North America due to the economic environment and a slightly longer than anticipated rebound in pricing in Brazil to offset the currency and volume impact," explained Chief Executive Sam Scott.
The company now expects to earn $1.70 per share to $2.10 per share for the year, compared to its prior forecast of $2.10 to $2.60 per share. Analysts, by contrast, were expecting an annual profit of $2.39 per share. The silver lining? CPO said it expects no visible market impact from the swine flu.
On the heels of this dismal report, CPO tumbled nearly 4% with the sound of the opening bell -- and its losses are accelerating. Today's drop simply extends the stock's lengthy decline beneath resistance from its 10-week and 20-week moving averages, which have guided the shares lower since August 2008. Potential double-bottom support lies at the 18 level, which contained CPO's lows in October 2008 and March 2009.
Following its post-earnings slide, CPO could be vulnerable to price-target cuts from analysts. The stock's average 12-month price target is $27.50, according to Thomson Reuters, representing a premium of more than 33% to Monday's closing price. With the shares down 28.5% already in 2009, this consensus target is looking more ambitious by the minute.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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