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western colorado | Analysts estimate net loss for JBS in the 4Q2015 but see 2016 as a good year
By Anna Flávia Rochas on 1/8/2016
Brazilian meat company JBS S.A. is expected to report a net loss for the last quarter of 2015 and a reduction in US beef margins, according to a report by analysts at Brazilian bank BTG Pactual.
They expect JBS to have registered BRL 119 million ($29.4 million) net loss in the fourth quarter of 2015, affected by an estimated BRL 1 billion ($247 million) cost from the company's derivative contracts betting on the devaluation of Brazil's currency.
JBS' net profit rose 215 percent in the third quarter, to BRL3.44 billion ($912.6 million), driven by strong financial gains by the company's derivative contracts, when the Brazilian real had a strong devaluation against the dollar. During the fourth quarter, the real remained practically flat against the dollar, according to BTG.
BTG expects JBS' EBITDA (earnings before interest, taxes, depreciation and amortization) at BRL 3.3 billion ($816 million) and net revenue of BRL 48.9 billion ($12 billion) in the fourth quarter.
“Our lower EBITDA estimate mainly reflects our expectation of lower U.S. beef margins, fueled by cattle price volatility during the quarter, which led to lower beef-cattle spreads,” analysts wrote. “Australia's growing cattle scarcity also probably took its toll on margins there."
BTG analysts believe 2016 will be a good year for JBS. "We believe U.S. beef prospects remain rosy, on expectations of 1-2 percent growth in available cattle, which in turn tends to improve margins,” they said.
Analysts have reduced their target price for the company's stock in 12 months, from BRL 26 ($6.42) to BRL 20 ($4.94). However, they consider the stock as still cheap and are giving a recommendation for "buy."
"We believe headline risks and, potentially, weaker quarterly results are more than priced-in right now," analysts Thiago Duarte and Jose Luis Rizzardo wrote in the report.
JBS stock rose 5.77 percent in Brazil's stock exchange Bovespa on Thursday, quoted at BRL 11 ($2.7). On Wednesday, the company stock fell 9.2 percent, after Brazilian newspaper Estado de S. Paulo reported that the federal police is investigating the involvement of JBS' former stakeholder Grupo Bertin in a bribery scheme to finance political campaigns in Brazil. | |
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