Bank of America (BofA) released a report to clients and the market on Thursday, April 13th, in which it lowered its estimates for Brazilian meat company Marfrig (BVMF:MRFG3), citing the “negative cycle of beef in the US and the challenging first quarter for beef in South America.” However, the bank remains more optimistic about BRF (BVMF:BRFS3), due to the company’s cash position.
According to analysts Isabella Simonato and Guilherme Palhares, Marfrig is expected to have “lower margins in the US and short-term challenges in South America, due to the Chinese beef ban in the first quarter.” Nevertheless, the company’s standalone operation generates cash flow, despite these adversities.
However, BRF, in which Marfrig holds a 33.25% stake, is seen as worse off, “mainly due to high leverage, expectations of R$1.4 billion cash burn in 2023, and the risk of a decline in consensus estimates.” So far, the analysts do not see any liquidity problems in the company that could lead to a capital injection into BRF.
BofA maintains a neutral recommendation for Marfrig’s shares, with a reduced price target of R$7.6, down from R$9. For BRF, the rating was recently downgraded to underperform, with a price target falling from R$9 to R$6.3.
At 3:55 PM (Brasilia time), Marfrig’s shares were down 5.29% to R$6.45, while BRF’s shares fell 6.61% to R$6.36.
