This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Imperial Sugar: A Sweet Spot in a Sour Economy

This time last week shares of Imperial Sugar (IPSU) moved against the grain of the general market due to a rumor circulating that it may be a takeover target.

While the company has neither confirmed nor denied the rumor, there are numerous factors that suggest that the shares of one of the largest refiners and marketers of sugar in NAFTA may be significantly undervalued relative to the company's sizable asset value and that near-term catalysts could materially improve earnings.

Foremost, the USDA is set to review its tariff rate quota by April 1, a move that could result in an increase in the amount of cheaper world sugar cane allowed into the country to alleviate a historically wide spread between U.S. and world prices.

As a sugar refiner, IPSU's margins are impacted by the difference between the price it receives by selling its refined sugar to customers and what it pays for raw sugar cane. While world prices have collapsed from multidecade highs in February, U.S. prices have remained stubbornly elevated as the market remains tight.

Mexico, a free trade sugar partner, is also suffering from a tight domestic sugar market and may not help alleviate price pressure.

Longer-term trends in the sugar industry may also benefit IPSU's earnings prospects. For example, the use of high fructose corn syrup, a sugar alternative used to sweeten sodas and packaged foods, may be losing favor as consumers desire more natural ingredients.

Most recently, ConAgra, (CAG - Get Report) Pepsico (PEP - Get Report) and Kraft (KFT) have all indicated that they will be replacing HFCS with natural sugar ingredients in certain products.

Additionally, organic sugar products appear to be gaining growing acceptance by customers. IPSU's 50% owned Wholesome Sweeteners joint venture is growing at a rate well above the overall sugar market.

According to recently disclosed figures in the company's 10-Q filing, sales and net income increased 31% and 159% year over year. The Wholesome Sweeteners business could contribute in excess of $100 million in annual sales to IPSU and be worth more than $50 million. IPSU has the option to purchase the remaining 50% of the business later this year, a move that would likely be accretive to earnings and shareholder value depending on structuring.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CAG $41.60 0.00%
GIS $56.89 0.00%
HSY $89.70 0.00%
K $74.97 0.00%
PEP $98.49 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs