NEW YORK (TheStreet) -- Ambev (ABEV) - Get Report stock is decreasing by 0.30% to $4.99 in late afternoon trading on Friday, as the Brazilian real weakens on speculation that officials will revise this year's budget target to show a deficit.
Based in Sao Paulo, Brazil, Ambev produces, distributes, and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt, and food in the Americas.
The real fell 1.1% to 3.8396 per dollar this afternoon, snapping two days of gains and bringing the currency down a total of 2% this week, Bloomberg reports.
Brazil's government plans to revise this year's budget target to forecast a deficit excluding interest payments of 0.3% of GDP, down from the current target of a 0.3% surplus, according to a report by Fola de S. Paulo, Bloomberg notes.
Further, officials will likely drop plans to bring back a financial transactions tax, according to Bloomberg.
Brazil is facing its worse financial recession since the 1930s, as the country contends with declining commodities prices and political turmoil. Ratings agencies Fitch, Moody's and the S&P have all downgraded the country in recent months because of the financial uncertainty.
Separately, TheStreet Ratings team rates AMBEV SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate AMBEV SA (ABEV) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Beverages industry and the overall market, AMBEV SA's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Net operating cash flow has slightly increased to $1,268.86 million or 5.55% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.08%.
- ABEV's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that ABEV's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ABEV has underperformed the S&P 500 Index, declining 23.93% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- AMBEV SA's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AMBEV SA reported lower earnings of $0.28 versus $0.32 in the prior year. For the next year, the market is expecting a contraction of 3.6% in earnings ($0.27 versus $0.28).
- You can view the full analysis from the report here: ABEV