Zacks Investment Research downgraded shares of Companhia Energetica de Minas Gerais (CIG) from OUTPERFORM to NEUTRAL on August 16, 2012, with a target price of $21.00.
Cemig reported a net income increase of 15% in local currency and a 16% revenue growth. Earnings came in at R$0.82 per share or US$0.42 per ADR. Growth prospects for this Brazilian electricity utility are bright. Operating efficiencies, new projects and strategic acquisitions all bode well for the future. Moreover, with the growing electricity demand in Brazil as an important growth booster, the national agency predicts a consumption hike of about 4.5% in the 2011-2021 timeframe. The nation is growing faster with the government's increasing keenness to invest heavily in the electric industry. The company is also doing every bit to increase its capacity in order to meet the escalating demand. Despite these positives, we have downgraded the stock from Outperform to a Neutral recommendation as rising operating expenses governmental interference and dependence on hydro sources for electricity pose a threat to growth.
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