Companhia Energetica de Minas Gerais (CIG), also known as CEMIG, is slated to release its third quarter 2010 results on Friday, November 12. The current Zacks Consensus Estimate for the third quarter is 44 cents, representing an annualized decline of 16.04%.
Second Quarter Highlights
CEMIG’s second quarter earnings per share was R$0.77 (US$0.43 per ADR) compared with R$0.88 (US$0.42 per ADR) in the second quarter of 2009. Earnings per ADR lagged behind the Zacks Consensus Estimate of US$0.47 per ADR.
Adjusted net income dipped 13.0% year over year to R$477 million (US$265 million) compared with R$547 million (US$261.7 million), primarily due to higher operating expenses and lower revenues, which decreased 0.6% year over year to R$2,954 million (US$1,641.1 million).
Electricity sold improved 12.5% year over year to 16,768 GWh versus 14,905 GWh in the year-ago quarter due to higher consumption by all final customers. Electricity sold to final customers was 11,718 GWh, up 7.22% year over year. Residential sales grew 3.99% year over year while industrial sales increased 9.06%.
Detailed discussion on the second quarter results can be found here: CEMIG Disappoints, Misses Estimate
Agreement of Estimate Revisions
In the last 30 days, there were no revisions in earnings estimates, except for a positive revision for fiscal 2010 and 2011.
The positive revision incorporates expectations of higher revenues, driven by improvements in the company’s distribution business and growth in generation. However, the positive momentum was restricted by concerns over escalating energy purchase and operating expenses.
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Agreement – Estimate Revisions |
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Current Qtr |
Next Qtr |
Current Year |
Next Year |
|
|
Up Last 7 Days |
0 |
0 |
0 |
0 |
|
|
Up Last 30 Days |
0 |
0 |
1 |
1 |
|
|
Down Last 7 Days |
0 |
0 |
0 |
0 |
|
|
Down Last 30 Days |
0 |
0 |
0 |
0 |
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Magnitude of Estimate Revisions
Earnings estimate for CEMIG in the last 30 days increased by a cent to $1.46 for fiscal 2010, representing an annualized decline of 4.74%. For fiscal 2011, estimates soared 4 cents to $1.72, an increase of 17.67%.
The third quarter’s estimates were down from 48 cents to 44 cents over the last 30 days.
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Magnitude – Consensus Estimate Trend |
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Current Quarter |
Next Quarter |
Current Year |
Next Year |
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|
Current |
0.44 |
0.37 |
1.46 |
1.72 |
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|
7 Days Ago |
0.44 |
0.37 |
1.46 |
1.72 |
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|
30 Days Ago |
0.48 |
0.37 |
1.45 |
1.68 |
|
|
60 Days Ago |
0.48 |
0.37 |
1.53 |
1.74 |
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|
90 Days Ago |
0.48 |
0.37 |
1.53 |
1.64 |
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Our Take
CEMIG, one of the largest integrated electric utilities in Brazil with more than 6,716 megawatts of installed generation capacity, derives approximately 97% from hydroelectric power. We believe the company stands well positioned to benefit from the increasing electricity demand in Brazil.
However, results in the fourth quarter will be impacted by an increase in operating expenses and energy purchase costs. Besides, adverse impacts are expected from the tariff adjustment announced in 2010 and the rising debt levels.
Moreover, persistent interference from the state government, competitive pressures in the Brazilian market and high dependence on natural water resources tend to be problematic.
Expecting the company to perform in line with the market, we maintain a Neutral recommendation on the stock.
CEMIG SA -ADR (CIG): Free Stock Analysis Report
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