Zacks Investment Research downgraded
CPFL Energia S.A.
) to a Zacks Rank #5 (Strong Sell) on Nov 19, 2013.
Why the Downgrade?
CPFL Energia's third-quarter 2013 results were disappointing
with reported adjusted net income of R$282 million (US$123
million) compared with R$460 million (US$227 million) in the
In the third quarter, net revenues in local currency, for CPFL
Energia decreased 2.0% year over year. The decline was primarily
due to reduced revenues from the Distribution segment, led by
negative tariff adjustments in the distribution companies and
lowered electricity sales to wholesalers. These were partially
offset by increased revenues in the Conventional Generation
segment and the Commercialization and Services segment.
In terms of expenses and margins, cost of electric energy
services in the quarter represented 53.7% of gross revenue,
dropped from 55.9% reported in the year-ago quarter. The adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA) margin in the quarter was 30.0%, down 420 basis points
from 34.2% in the year-ago quarter.
The company was negatively affected by foreign currency
transactions in the reported quarter. Moreover, it faced a
decline in domestic activities, driven by inflation, more
stringent credit conditions and lowering of business and consumer
In the first half of 2013, the company recorded a dividend
yield of 3.9%, falling from 6.1% in the comparable period last
year. This upsets investors' confidence on the stock.
Other Stocks to Consider
CPFL Energia is a well known electric utility in Brazil with a
current market capitalization of $8 billion. Other stocks to
watch out for in the industry are
Black Hills Corp.
Alliant Energy Corp.
), each with a Zacks Rank #2 (Buy).
BLACK HILLS COR (BKH): Free Stock Analysis
CPFL ENERGI-ADR (CPL): Free Stock Analysis
EDISON INTL (EIX): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis
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