Companhia Brasileira de Distrib. (ADR) (NYSE:CBD)

CAPS Rating: 5 out of 5

The Company operates primarily as a retailer of food, clothing, home appliances and other products through its chain of hypermarkets, supermarkets, specialized and department stores.

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Player Avatar TrackZacks (< 20) Submitted: 5/18/2007 4:56:40 PM : Underperform Start Price: $16.42 CBD Score: -42.00

Downgrading Pão de Açúcar to Sell

Posted Fri May 18, 01:17 pm ET
by Zacks Equity Research

We see today that Zacks senior Latin American markets analyst Claudio Freitas, CFA is downgrading shares of Companhia Brasileira de Distribuicao (CBD), or Pão de Açúcar. We found out why by looking into his latest report:

“We are changing our recommendation on Pão de Açúcar from Hold to Sell. The company reported weaker-than-expected results for the first quarter, including lower margins and disappointing net income. Additionally, Sendas Distribuidora's performance remains weak, and the short-term outlook is not encouraging.

“The aggressive expansion of Wal-Mart (WMT) in Brazil remains a concern. We are reducing our 2006 and 2007 earnings estimates on CBD. Our target price is $27, or 22x our 2007 EPS [earnings per share] estimate.

“CBD has been following a strategy to use lower prices and promotions to increase its market share and prevent other major retailers from increasing their share in the key market in the Southeast of Brazil, mainly the States of Sao Paulo and Rio de Janeiro. Pão de Açúcar, Wal-Mart, and Carrefour are all fighting for incremental market share gains. Wal-Mart, which started its business in Northeast Brazil, has been increasing its presence in the Southeastern Brazil, the richest part of the country, an area dominated by both Pão de Açúcar and Carrefour.”

Read the analyst report on CBD
http://www.zacks.com/ZER/zer_comp_reports.php?_ticker=CBD&f_report_type=%20&f_bsh=&f_period=7&f_industry=

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