On Tuesday, Itau BBA increased its price target on BRF - Brasil Foods S.A. (BRFS3:BZ) (NYSE: BRFS), a leading food company, to BRL19.00 from BRL11.00. The firm maintained its Outperform rating on the stock. Itau BBA's revised price target reflects an updated EBITDA estimate for 2024, now set at BRL 7.0 billion, marking a 9% increase from previous calculations.
The financial institution's new forecast positions them 6% above the consensus for 2024 and 7% for 2025. The upward revision is based on several factors, including controlled pullet placements in 2024, which are anticipated to not disrupt chicken supply dynamics in Brazil or international markets. Additionally, Itau BBA expects corn and soybean costs to remain stable at BRL 56 per bag and USD 12 per bushel, respectively.
Itau BBA also anticipates a year-over-year EBITDA margin expansion for BRF, projecting 14.9% in the domestic market and 9.7% internationally in 2024. The firm's enhanced view of BRF's investment story is attributed to the company's operational improvements and the strengthening of its capital structure.
Despite the positive outlook, Itau BBA noted that the Free Cash Flow (FCF) Yield for 2024 is estimated at approximately 7%, which they believe is still tight for justifying a positive stance at the moment. Nonetheless, the firm updated its target price while acknowledging that short-term momentum is too significant to overlook.
InvestingPro Insights
As investors digest the updated price target from Itau BBA for BRF - Brasil Foods S.A. (NYSE: BRFS), current real-time data from InvestingPro can provide additional context. The company's market capitalization stands at $5.65 billion, reflecting its significant presence in the food industry. Despite recent challenges, analysts forecast a turnaround with net income expected to grow this year, positioning BRF as a potential growth story within its sector.
InvestingPro Tips highlight BRF's status as a prominent player in the Food Products industry and suggest a strong return over the last three months, with a 28.24% price total return. Moreover, the company has seen a large price uptick over the last six months, boasting a 56.28% price total return. These metrics suggest that BRF's stock has been gaining positive momentum, aligning with Itau BBA's observation of significant short-term momentum.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available that could further inform investment decisions. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights. The current list of tips for BRF includes a total of 10, offering a comprehensive view of the company's financial health and market position.
Understanding BRF's valuation is also crucial, and the current P/E ratio stands at -11.80, with an adjusted P/E ratio for the last twelve months as of Q4 2023 at -13.97. While these numbers indicate that BRF has not been profitable over the last year, analysts predict profitability this year, which could signal a turning point for the company's financial performance.
Investors interested in a deeper dive into BRF's potential can explore these insights and more at InvestingPro.
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