CEMIG Downgraded to Strong Sell - Analyst Blog

By Zacks Equity Research,

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Zacks Investment Research downgraded Companhia Energetica de Minas Gerais ( CIG ), also known as CEMIG to a Zacks Rank #5 (Strong Sell) on Oct 8, 2013.

Why the Downgrade?

CEMIG had compelling long-term growth prospects with the demand for electricity increasing manifold in Brazil. However, the concerns surrounding the stock have overshadowed the growth aspects in the near term.

Though earnings results for second quarter 2013 increased on a year-over-year basis, it lagged behind the Zacks Consensus Estimate by 52.5%. Operating expenses have been rising for CEMIG in the last few quarters. In the second quarter 2013, operational costs and expenses soared 6% year over year. Moreover, long-term debts stood at $2.3 billion.

The Zacks Consensus Estimate for CEMIG has fallen 6.2% to $1.36 per ADR for year 2013 in the last 60 days while the same is pegged at $1.36 per ADR for year 2014. Estimate for 2013 represents a year-over-year growth of 44.4%.

CEMIG has an average negative earnings surprise of 27.9% for the trailing four quarters. This along with negative revision in earnings estimates raises concerns about the financial results in the coming quarters. Also, we have an Earnings ESP of -12.5% for year 2013.

Other Stocks to Consider

CEMIG is one of the largest integrated electric utilities in Brazil with approximately 97% of the company's installed generation capacity being hydroelectric power. The stock currently has a $8.6 billion market capitalization.

Other stocks to watch out for in the industry are Alliant Energy Corporation ( LNT ), Brookfield Infrastructure Partners L.P. ( BIP ) and Cleco Corporation ( CNL ), each holding a Zacks Rank #2 (Buy).

BROOKFIELD INFR (BIP): Free Stock Analysis Report

CEMIG SA -ADR (CIG): Free Stock Analysis Report

CLECO CORP (CNL): Free Stock Analysis Report

ALLIANT ENGY CP (LNT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BIP , CIG , CNL , LNT

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