Brazilian Meat Titans Thrive Amid Market Downturn

In 2024, despite the Brazilian stock market’s tough year with the Ibovespa falling about 8.5%, the meat industry shows remarkable growth.

BRF (BRFS3), Marfrig (MRFG3), and JBS (JBSS3) shine bright. Their stocks surged by 37.8%, 18.2%, and 16% respectively as of May 29th.

BRF

BRF stands out with a successful turnaround. Since restructuring in 2022, BRF has attracted market attention.

First-quarter results were “historic,” boosting stock prices over 10%. The company revamped its capital structure and operations, including Sadia’s reorganization.

Market conditions favored BRF, with higher international poultry prices and lower feed costs. These factors improved margins significantly.

Bank of America upgraded BRFS3 from underperform to neutral, citing positive earnings momentum.

XP praised BRF’s results, with EBITDA hitting R$ 2.1 billion, 17% above expectations.

This performance suggests BRF is less cyclical, promising more positive revisions.

Marfrig

Marfrig also benefited, owning over 50% of BRF. This stake played a key role in positive first-quarter results despite U.S. beef operation challenges.

The beef cycle, driven by supply and demand, affects profit margins.

Abundant cattle supply lowers prices, benefiting processors like Marfrig. However, reduced supply increases prices and compresses margins.

Marfrig’s high leverage from recent BRF acquisitions remains a concern.

However, strong BRF performance could help, with dividends and asset sales reducing leverage.

JBS

JBS impressed with its first-quarter results, driving an 8% stock price increase. Itaú BBA noted JBS’s strong quarter, with adjusted EBITDA slightly above estimates.

JBS’s consolidated adjusted EBITDA reached R$ 6.4 billion, nearly 25% above projections.

Strong performances from US Pork and Seara offset pressures in JBS Beef North America.

Analysts believe the worst of the U.S. cattle cycle is over, suggesting stability and benefits for Marfrig and JBS.

In summary, despite a challenging year for the Brazilian stock market, BRF, Marfrig, and JBS thrive.

Their robust performances capture investor interest, showcasing resilience and growth amidst market challenges.

This highlights the meat industry’s importance and potential for future success.

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