UPDATE: Goldman Sachs Upgrades BRF - Brasil Foods S.A. (BRFS) to Neutral

Goldman Sachs analyst Thiago Bortoluci upgraded BRF - Brasil Foods S.A. (NYSE: BRFS) from Sell to Neutral.

The analyst comments "In our view, the recent pullback (BRF shares were down by -8% the day after it reported results, vs. -3% for the Ibovespa) offers an opportunity to reassess BRF's case in light of the ongoing operating turnaround and the recent changes to the management team and the Board. We believe earnings momentum is about to inflect (albeit at an arguably slower pace vs. what the market has initially priced in) which, together with potentially lower cost inflation, increasing operating efficiency and good results from the international divisions, could sustain positive free cash flow generation and sequentially lower leverage from 4Q22 on. Trading at 5.2x forward EBITDA, we view BRF as one of the cheapest stocks within its global peer group, despite our expectations of solid EBITDA CAGR of +18.5% for 2022-24; as a reference, in-natura and processed food peers trade at a median of 10.7x and are expected to grow EBITDA by +6.5%. Although we recognize some long-standing underlying challenges to the equity story persist (e.g., execution risks, competition from JBS-Seara, limited short-term balance sheet flexibility and potential volatility in grain prices), we think the risk-reward is significantly more balanced now, and we see limited downside risks to consensus forward expectations. We upgrade BRF shares to Neutral (from Sell before), with a 12-month target price of R$13.20 per share (unchanged from prior); we revise our EBITDA estimates for 2023-24 up on average by +7.7%, and we are essentially in-line with BBG's consensus."

For an analyst ratings summary and ratings history on BRF - Brasil Foods S.A. click here. For more ratings news on BRF - Brasil Foods S.A. click here.

Shares of BRF - Brasil Foods S.A. closed at $2.14 yesterday.

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