NEW YORK (TheStreet) -- Ambev (ABEV - Get Report) stock closed lower by 6.47% to $4.77 on Tuesday, after Brazil's real weakened on disappointing economic data from China and political turmoil at home.
Ambev is a brewing company based in Sao Paulo, Brazil.
The Brazilian real led losses among the world's 16 biggest currencies, down 2.4% to 3.8658 per dollar this afternoon and 31% this year, Bloomberg reports.
Weighing on the real, Brazil's top trading partner China announced its imports declined for an eleventh straight month in September. Brazil is currently facing its longest recession since the 1930's, as weak demand from China pushes commodities prices lower.
Amid the economic slowdown, lawmakers are calling for the impeachment of President Dilma Rousseff. Government allies worry that house speaker Eduardo Cunha will begin the impeachment process shortly, and investors have expressed concern that the political clashes could interfere with Rousseff's proposals to close the country's 2016 budget deficit.
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