Zacks Investment Research upgraded shares of Companhia Brasileira de Distribuicao (CBD) from UNDERPERFORM to NEUTRAL on November 20, 2014, with a target price of $43.00.
We are reverting back to Neutral recommendation on Companhia Brasileira de Distribuicao from Underperform after the company recorded solid earnings and sales growth in the third quarter of 2014, despite tough macroeconomic conditions. CBD delivered 9.3% growth in profits reflecting higher profitability at Assa , Multivarejo and Via Varejo segments, which made up for the gross margin pressure. The company's gross sales increased 10.2% and net sales increased 10.9% year over year, driven by improved performance of the Food businesses and Cnovo. We are encouraged by the company's ability to deliver solid sales driven by new store openings and positive same-store sales growth. The company's aggressive pricing strategy, which focused on reducing sale prices, has also won customers albeit at the cost of sacrificing its gross margins. The company is optimistic over the long term and expects to open 400 new food stores by 2016. The company also has expansion plans for its wholesaler, Assai, which has been posting solid results in the last few quarters.
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