Moody’s Downgraded BRF S.A. Rating to Ba1



Price movement of BRF

BRF S.A. (BRFS) has a market cap of $11.9 billion. BRFS fell by 0.87% to close at $13.67 per share as of February 25, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 3.5%, 20.3%, and -1.1%, respectively.

Currently, BRFS is trading 7.0% above its 20-day moving average, 4.4% above its 50-day moving average, and 20.5% below its 200-day moving average.

The Schwab Emerging Markets Equity Fund (SCHE) invests 0.63% of its holdings in BRFS. The ETF tracks an index of emerging markets companies weighted by market cap. The YTD price movement of SCHE was -5.8% as of February 24, 2016.

The market cap of BRFS’s competitors are as follows:

  • Unilever N.V. (UN) — $129.8 billion
  • Tyson Foods (TSN) — $24.1 billion
  • Hormel Foods (HRL) — $23.2 billion
Article continues below advertisement

Moody’s downgraded BRF S.A.

Moody’s Investors Service has downgraded BRS S.A.’s senior unsecured rating to Ba1 from Baa2. Moody’s also assigned a Ba1 corporate family rating (or CFR) to BRF. The outlook for the ratings is negative.

On February 24, 2016, Moody’s Investors Service downgraded Brazil’s issuer and bond ratings to Ba2 and changed its outlook to negative.

The two main drivers for this downgraded rating are:

  • deterioration in Brazil’s debt metrics in a low growth environment, with debt likely to exceed 80% of GDP within three years
  • challenging political conditions that continue to complicate the authorities’ fiscal consolidation efforts and delay structural reforms

Performance of BRF in recent fiscal 3Q15

BRF reported its fiscal 3Q15 net operating revenue of $2,260.3 million, a fall of 34.5% compared to net operating revenue of $3,449.1 million in fiscal 3Q14. Its net income and EPS (earnings per share) fell to $187.5 million and $0.22, respectively, in fiscal 3Q15, compared to $269.8 million and $0.31, respectively, in fiscal 3Q14.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of BRFS are 19.3x and 3.2x, respectively, as of February 25, 2016.

In the next part, we’ll look at Gentex.


More From Market Realist