Cemig Beats Estimates as EBITDA Climbs 31% to BRL 2 Billion

Cemig reported quarterly earnings per share of $0.07 on Friday, beating the analyst consensus of $0.05 by $0.02, according to Zacks. The Brazilian electric utility paired the beat with a 31% year-over-year rise in recurring EBITDA (earnings before interest, taxes, depreciation and amortization), which reached approximately BRL 2 billion.

Reported EBITDA came in at BRL 2.7 billion, while net income reached BRL 1.7 billion. The latter figure carries an asterisk: a BRL 1.1 billion reversal of tax provisions, following a favorable court ruling, flattered the bottom line. The quarter also showed a net margin of 10.44% and return on equity of 16.89%.

How strong is the balance sheet?

Management pointed to a triple-A credit rating, leverage of 2.43x and BRL 5.4 billion in cash at quarter-end. Executives said the debt maturity profile and funding access support the company's investment plans. The firm's debt-to-equity ratio stands at 0.58.

The investment plans are substantial. Cemig intends to deploy close to BRL 7 billion in 2026, with roughly 75% of that already invested, including BRL 4.1 billion in distribution. Management linked the spending and operating improvements to better service metrics, and noted that distribution investment also positions the company for the 2028 tariff review.

What drove the mixed segment results?

Not every business performed identically.

• Trading swung to positive EBITDA of BRL 18 million, from a BRL 37 million loss.
• Lower inflation weighed on generation and transmission results.
• Customer migration to the free market pressured margins at Gasmig, the company's natural gas distribution unit in Minas Gerais.

On the regulatory front, Cemig renewed the Sá Carvalho concession for another 30 years. Management said it is optimistic about renewals for the Nova Ponte and Emborcação concessions as well, though those decisions remain pending.

How did the market and analysts respond?

Shares traded up $0.07 on Friday to $1.92, on volume of 2,649,922 shares against an average of 5,822,839. The stock trades below its 50-day moving average of $2.12 and its 200-day moving average of $2.20, with a one-year range of $1.77 to $2.76.

The company carries a market capitalization of $5.48 billion, a price-to-earnings ratio of 10.08 and a beta (a measure of volatility relative to the market) of 0.86. Its quick ratio and current ratio both stand at 0.93.

Analysts have been busier than the share price. Zacks Research initiated coverage on November 2 with a "hold" rating. Wall Street Zen raised the stock to "hold" on October 17, while Weiss Ratings cut it from "buy (b-)" to "hold (c+)" on October 26. Two analysts now rate the shares a hold, and MarketBeat.com data shows an average rating of "hold".

What is Cemig?

Companhia Energética de Minas Gerais, founded in 1952 and controlled by the state government of Minas Gerais, is headquartered in Belo Horizonte. The company generates, transmits and distributes electricity through a portfolio that includes hydroelectric and renewable facilities, participates in electricity trading, and distributes natural gas through Gasmig.

The verdict: an earnings beat, a fortified balance sheet and a concession renewal. The market's response, and three consecutive hold ratings, suggest analysts want the tax reversal to prove an exception rather than a habit.