Why Did BRF Rise on July 22?



Price movement

BRF (BRFS) has a market cap of $13.0 billion. It rose by 2.7% to close at $15.82 per share on June 22, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.4%, 22.8%, and 16.2%, respectively, on the same day. BRFS is trading 9.1% above its 20-day moving average, 15.9% above its 50-day moving average, and 13.8% above its 200-day moving average.

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Related ETF and peers

The Schwab Emerging Markets Equity ETF (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 14.2% on July 22.

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

  • Unilever (UN): $138.2 billion
  • Tyson Foods (TSN): $26.9 billion
  • Hormel Foods (HRL) — $19.8 billion

Latest news on BRFS

In a press release on July 22, 2016, Bloomberg reported, “BRF SA, Brazil’s biggest processed-food maker, is considering selling stock in its Sadia Halal unit in a deal that could value the food products company at about $5 billion, said people familiar with the matter.”

It noted, “An initial public offering of the company, which sells frozen food products to markets including the Middle East, could raise $1.5 billion, though no final decisions have been made on the location or timing of a sale, they said.”

It also stated, “BRF said in an e-mailed statement that while strategic alternatives are being analyzed to increase the unit’s expansion potential, it would be ‘premature to say that there is something of this nature going on.’”

Performance in 1Q16

BRF (BRFS) reported 1Q16 net operating revenue of 8.1 billion Brazilian reais, a rise of 15.2% over its net operating revenue of 7.0 billion reais in 1Q15. The company’s cost of sales as a percentage of net operating revenue rose by 8.2%. Its operating income fell by 29.1% between 1Q15 and 1Q16.

Its net income and EPS (earnings per share) fell to 39.0 million reais and 0.05 real, respectively, in 1Q16, compared with 462.0 million reais and 0.54 real, respectively, in 1Q15.

BRF’s cash and cash equivalents fell by 4.0% and its inventories rose by 35.4% between 1Q15 and 1Q16. Its current ratio fell to 1.6x and its debt-to-equity ratio rose to 2.0x in 1Q16, compared with 1.9x and 1.5x, respectively, in 1Q15.

In the next and final part of this series, we’ll discuss Whirlpool.


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