At BRF SA, The Flesh Is Still Weak And Investor Spirits Aren't So Willing

It has gone from bad to worse at BRF SA (BRFS), as frequently happens when a company reaches a "critical mass" of mismanagement and poor decision-making. BRF's big miss with fourth quarter results put the cap on what was already a pretty poor 2017, and though BRF has a new management team and a new plan, major investors seem to want yet more change.

I've always thought it was going to take time and patience (a lot of patience…) for BRF to develop, and I don't believe the company is unfixable. That said, there's a lot of work to be done in both the domestic and international operations and plenty of volatility inherent in a commodity-driven business with significant international emerging market exposure. I believe mid-to-high single-digit revenue growth is still possible and, coupled with mid-to-high single-digit FCF margins, can still support a $10-plus fair value from here, but this is a high-risk call that is going to need a couple of years to really play out.

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At BRF SA, The Flesh Is Still Weak And Investor Spirits Aren't So Willing