Zacks Investment Research downgraded
Companhia de Saneamento Basico do Estado de São Paulo, or
) to a Zacks Rank #5 (Strong Sell) on Sep 18.
Why the Downgrade?
Year-to-date, SABESP has provided a negative return of 18.4%.
Also, the Zacks Consensus Estimate for 2013 and 2014 earnings at
US$1.38 per ADR and US$1.25 per ADR represent year-over-year
decline of 1.9% and 9.8%, respectively.
Talking of the company's financial performance, second quarter
2013 results were impressive. Earnings per ADR at US$0.26
registered 18.2% increase and revenue grew 13.0% on higher water
supply, sewage collection and treatment in the quarter. However,
continuous increase in costs and expenses has over time proved
detrimental to SABESP's profitability.
Cost of sales and services accounted for 61.9% of total revenue
in the second quarter 2013, up from 58% recorded in the first
quarter 2013 and representing year-over-year increase of 10.5%.
Operating expenses increased by 30.8% year over year. Steady rise
in costs will impact margins of the company. Besides these, risks
arising from political interference, mounting debt levels and
foreign exchange losses cannot be ignored since these problems
pose serious threat to future growth.
In the last 60 days, the Zacks Consensus Estimate for SABESP has
gone down by 19.4% to $1.25 for 2014. Also, we have an
of -7.2% for 2014.
Other Stocks to Consider
SABESP currently has a $7.0 billion market capitalization. Other
companies to watch out for in the industry are
Connecticut Water Service Inc.
), with Zacks Rank #1 (Strong Buy) while
Consolidated Water Co. Ltd.
), each come with a Zacks Rank #2 (Buy).
CONN WATER SVC (CTWS): Free Stock Analysis
CONSOLTD WATER (CWCO): Free Stock Analysis
SABESP -ADR (SBS): Free Stock Analysis Report
SJW CORP (SJW): Free Stock Analysis Report
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