Corteva cut at J.P. Morgan on valuation after ‘disappointing’ guidance (NYSE:CTVA)

Corteva cut at J.P. Morgan on valuation after ‘disappointing’ guidance (NYSE:CTVA)

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Corteva (NYSE:CTVA) -4.4% in Friday’s trading as J.P. Morgan downgrades shares to Neutral from Overweight with a $58 price target, citing valuation after a 23% run-up in the three months prior to the company’s Q1 earnings report and guidance seen as “disappointing.”

The rate of profitable growth for Corteva (CTVA) typically is affected by the general level of grain prices – higher grain prices tend to lead to improved corn and soy pricing, and lower grain prices tend to lead to diminished positive pricing effects – but “higher commodity costs, and sharp declines in the value of the euro and the Turkish lira are likely to penalize financial returns in 2022,” JPM’s Jeffrey Zekauskas writes, adding that domestic corn acres likely will be lower Y/Y or flat at best.

The analyst estimates Corteva’s (CTVA) 2022 cost headwinds at $975M, including $500M in cost inflation and supply chain challenges in Crop Protection, and $375M in Seed cost inflation due to increased grain prices.

Corteva (CTVA) has strong pricing power and is “a top pick for a high inflation environment,” Lirco Lysek writes in a bullish analysis newly published on Seeking Alpha.

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