BRF Brazil Food SA - Momentum
April 25 2011 - 8:00PM
Zacks
BRF Brazil Food SA (BRFS) is capitalizing off the strong
Brazilian economy, recently hitting a new multi-year high after
reporting strong Q4 results in late March. With a bullish growth
projection and strong industry rank, this Zacks #1 rank stock is a
meaty cut for momentum.
Company Description
Brasil Foods SA, through its subsidiaries, engages
in the production and sale of poultry, pork, beef and various dairy
products in Brazil and Internationally. The company was founded in
1900 and has a market cap of $18 billion.
Although BRFS has been strong for most of the last
12 months, shares got an extra boost in late March when the company
reported strong Q4 results that showcased strong volumes and
growing margins.
Fourth-Quarter Results
Revenue for the period was up 21% from last year to
$6.4 billion. Earnings also came in strong at 24 cents per share, a
huge increase from a penny in the same period last year.
The good quarter was driven by a combination of
higher volumes and prices, where prices paid for beef, chicken and
pork were all on the upswing on increased global demand related to
the economic recovery.
But while rising prices of meat are a good thing
higher grain costs pose a threat to the company's margins. But so
far, that threat remains at bay, with gross margin expanding to
28.8% from 23.2% from last year.
Financial Profile
BRF also remains focused on its balance sheet, with
cash and short-term investments of $1.75 billion and total debt of
$4.2 billion, down $604 million from last year. Its debt-to-equity
ratio of 40% is well below its peer average of 68.5%.
Estimates
Although the good quarter and bullish global
environment for meat products, estimates have been a bit flat, with
the current year sitting at 78 cents and the next-year estimate
pegged at 99 cents, a bullish 28% growth projection.
Valuation
In light of recent gains, the valuation picture
looks a bit hot, with a forward P/E of 26X against its peer average
16X.
12-Month Chart
On the chart, shares had been trending higher for
most of the last year before spiking into a new high in late March
on the good quarter. Take a look below.
![](http://www.zacks.com/images/upload_dir/1303750127.jpg)
Michael Vodicka is the Momentum Stock Strategist
for Zacks.com. He is also the Editor in charge of the Zacks
Momentum Trader Service.
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