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On Wednesday, Goldman Sachs adjusted its stance on Rumo SA (RAIL3:BZ), downgrading the stock from Buy to Neutral and reducing the price target to R$20.50 from the previous R$25.00. The decision by the analysts comes as they anticipate a slowdown in the company's earnings before interest, taxes, depreciation, and amortization (EBITDA), projecting an approximate 5% year-over-year growth for 2025 compared to the stronger growth of approximately 25/36% expected in 2023 and 2024.
The firm's analysts cited several reasons for the downgrade, including a deceleration in momentum as the company moves into 2025, with tougher comparables on the horizon. Additionally, they noted limited potential for upward revisions in consensus estimates, highlighting that their projections are currently around 5% below the Bloomberg consensus for Rumo's 2025 EBITDA.
Goldman Sachs also pointed out the balanced valuation of Rumo's stock under the current scenario of high risk-free rates in Brazil. They estimate the 2025 enterprise value to EBITDA (EV/EBITDA) ratio at approximately 6.0x, which is close to the 6.5x implied by the correlation with the risk-free rates.
Since the inclusion of Rumo's shares on the Americas Buy List on June 4, 2024, the stock has seen a decline of around 13% in value, underperforming the IBOVESPA, which has fallen by 2% in the same period. The performance has been largely attributed to the rising risk-free rates in Brazil, particularly affecting companies like Rumo with long-duration names.
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