Itau BBA maintains Outperform on JBS, reiterates R$51 target

On Monday, JBS SA (JBSS3:BZ) (OTC: OTC:JBSAY), a $12.8 billion market cap food products giant, maintained their Outperform rating with a steady price target of R$51.00, as confirmed by Itau BBA. According to InvestingPro analysis, JBS appears undervalued with strong fundamentals, generating $72.8 billion in revenue over the last twelve months. The firm's outlook remains positive following JBS's announcement of acquiring a significant stake in Mantiqueira, a major player in the Brazilian egg market.

JBS announced today its strategic move to purchase a 48.5% stake in the capital stock of Mantiqueira, along with 50% of the voting shares. This deal positions JBS as a co-controller of Mantiqueira alongside its founder, Mr. Leandro Pinto. Mantiqueira is not only one of the top egg producers in Brazil but also stands among the leading egg producers globally. With facilities across six Brazilian states, Mantiqueira distributes its products nationwide and exports to South America, Asia, Africa, and the Middle East.

The transaction's valuation is based on an Enterprise Value of BRL 1.9 billion for 100% of Mantiqueira. Trading at an attractive P/E ratio of 10.5 and demonstrating robust financial health with $5.5 billion in EBITDA, JBS continues to expand strategically. Itau BBA analysts pointed out that the egg segment in Brazil has experienced a compound annual growth rate over the past decade that surpasses other protein categories in terms of production and consumption. The acquisition marks JBS's entry into a new line of business, further solidifying its role as a significant protein supplier in various categories and regions.

Analysts at Itau BBA estimate Mantiqueira's top line to be around BRL 2.0 billion, which would account for approximately 0.5% of JBS's net revenues projected for FY25. The purchase price represents about 7% of Itau BBA's Free Cash Flow to Equity (FCFE) generation expectation for JBS in the same year, indicating a minimal impact on the company's leverage.

The acquisition is expected to create immediate synergies in grain purchases and may lead to further consolidation in the egg industry. With a significant dividend yield of 8.95% and strong free cash flow of $2.65 billion, JBS demonstrates robust financial performance. Itau BBA's continued support for JBS stock reflects confidence in the company's strategic growth and the anticipated benefits from this recent acquisition. For deeper insights into JBS's financial health and growth prospects, including 12 additional exclusive ProTips, visit InvestingPro.

In other recent news, JBS SA, a global food company, has seen a significant increase in its Q3 financial performance. The company reported an adjusted EBITDA of R$11.9 billion, surpassing both BMO Capital's and consensus estimates. This robust performance led to an increase in the company's EBITDA guidance for 2024 to a range of R$37.0 billion to R$38.1 billion. BMO Capital Markets subsequently increased its price target for JBS SA shares, maintaining an Outperform rating.

JBS SA also reported record net revenues of $19.9 billion in Q3 2024, a substantial increase from the previous year. EBITDA rose to $2.2 billion, reflecting a consolidated margin of 10.8%, a nearly 5% increase from Q3 2023. The company also announced a dividend of $0.17 per share, demonstrating confidence in its financial stability.

Looking ahead, JBS SA projects a net revenue of $77 billion for 2024 and an adjusted EBITDA between $6.9 billion and $7.1 billion. Despite potential challenges such as rising livestock prices and potential impacts from tariffs, the company remains optimistic, expecting significant cattle supply increase in the second half of 2025. These are recent developments for JBS SA.

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