NEW YORK ( TheStreet) -- Centrais Eletricas Brasileiras (NYSE: EBR.B) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself. Highlights from the ratings report include:
- ELETROBRAS-CENTR ELETR BRAS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ELETROBRAS-CENTR ELETR BRAS turned its bottom line around by earning $0.77 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($2.74 versus $0.77).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 402.0% when compared to the same quarter one year prior, rising from $136.41 million to $684.73 million.
- The revenue fell significantly faster than the industry average of 2.7%. Since the same quarter one year prior, revenues fell by 45.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for ELETROBRAS-CENTR ELETR BRAS is currently extremely low, coming in at 6.80%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 27.60% has significantly outperformed against the industry average.
- Net operating cash flow has significantly decreased to -$2,798.42 million or 229.76% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
-- Written by a member of TheStreet Ratings Staff