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On Friday, BMO Capital Markets adjusted its outlook on shares of JBS SA (JBSS3:BZ) (OTC: OTC:JBSAY), a leading global food company, by increasing the price target to R$48.00 from the previous R$46.00. The firm maintained its Outperform rating on the stock.
The revision follows JBS SA's third-quarter financial results, where the company reported an adjusted EBITDA of R$11.9 billion. This figure surpassed both BMO Capital's and the consensus estimates, which stood at R$10 billion and R$9.8 billion respectively. The strong performance was attributed to exceptional results from the Seara brand and the company's Brazil operations.
In response to these results, JBS has updated its EBITDA guidance for the year 2024 to a range of R$37.0 billion to R$38.1 billion. This forecast suggests that the fourth quarter could perform above market expectations, even at the lower end of the guidance.
BMO Capital has reiterated its positive stance on JBS SA, citing several factors for its optimism. The company's strong fundamentals, particularly outside of North American beef, were highlighted as a driving force.
Moreover, internal initiatives related to operational efficiency and organic growth projects were recognized as beneficial. The firm also noted the increasing potential for accretive capital deployment, including the possibility of acquiring Oscar Mayer, as a positive development.
The raised price target to R$48 reflects a valuation that remains discounted at 5.0x to 5.5x the firm's estimated 2025 EBITDA. This is below the historical average multiple of 6.8x, suggesting that the stock may still be undervalued despite the target increase.
In other recent news, global protein industry leader JBS S.A. reported record net revenues of $19.9 billion in Q3 2024, signifying a substantial increase from the previous year. The company's EBITDA rose to $2.2 billion, reflecting a consolidated margin of 10.8%, a nearly 5% increase from Q3 2023. These earnings results were attributed to strong demand across its diverse product portfolio, particularly in the poultry and pork segments.
In addition, JBS S.A. announced a dividend of $0.17 per share, totaling approximately $382 million, demonstrating confidence in its financial stability. The company's net debt was reduced by $1 billion, and leverage decreased to 2.15x. Looking forward, the company 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 or trade wars, JBS S.A. remains optimistic, expecting significant cattle supply increase in the second half of 2025. The company's focus on operational excellence, innovation, and its multi-protein business model is anticipated to sustain growth. These are recent developments for JBS S.A.
InvestingPro Insights
JBS SA's recent performance and BMO Capital's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $13.48 billion, reflecting its significant presence in the Food Products industry. JBS's revenue for the last twelve months as of Q2 2024 reached $67.53 billion, with a notable quarterly revenue growth of 12.56% in Q2 2024, aligning with the strong results mentioned in the article.
InvestingPro Tips highlight JBS's financial strength and shareholder value. The company is expected to grow its net income this year, which corroborates BMO Capital's positive stance. Additionally, JBS pays a significant dividend to shareholders, with a current dividend yield of 5.87%, making it an attractive option for income-focused investors.
The stock's valuation metrics also present an interesting picture. With a P/E ratio of 20.12 and a price-to-book ratio of 1.69, JBS appears to be trading at reasonable multiples considering its market position and growth prospects. This aligns with BMO Capital's view that the stock may still be undervalued.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips on JBS SA, providing a deeper understanding of the company's financial health and market position.
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