Tuesday, BofA Securities downgraded the stock rating of Cia Energetica de Minas Gerais (NYSE:CIG), commonly known as Cemig, from Neutral to Underperform. BofA Securities cited a reduction in their estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) for the years 2025-26 by 10% and adjusted the price objective to R$11 from the previous R$13. According to InvestingPro data, Cemig currently trades at $1.76 with a P/E ratio of 4.19, and analysis suggests the stock may be undervalued despite recent challenges.
The downgrade reflects BofA Securities’ concerns about the negative impact of regional power price differences in Brazil and Cemig’s fourth-quarter results from 2024. Analysts at BofA Securities anticipate a 14% downside risk to the consensus EBITDA for 2025. Current EBITDA stands at $1.52 billion, with the company maintaining a "GREAT" financial health score of 3.13 on InvestingPro.
In addition to the EBITDA projections, BofA Securities expects a year-over-year decline in Cemig’s dividend yield, forecasting a 5% yield for 2025, compared to the actual 15% yield in 2024. The firm’s analysts have not factored in the reversal of additional liabilities in their base-case scenario. Current dividend yield stands at 12.49%, with revenue growth at 8.06% over the last twelve months.
The report from BofA Securities also notes that Cemig is trading at an 11.5% real internal rate of return (IRR), which they consider unattractive when compared to its private sector peers. The downgrade reflects a more cautious outlook on the company’s financial performance and shareholder returns.
Investors in Cemig should be aware of the latest analysis from BofA Securities as it may influence the stock’s performance on the New York Stock Exchange. The revised price objective and concerns over EBITDA and dividend yield contribute to the current assessment of Cemig’s investment potential.
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