By Brazil Stock Guide — China’s beef import quotas are expected to weigh heavily on JBS’s third-quarter earnings, disrupting export volumes and squeezing margins at the Brazilian meatpacking giant’s operations in Brazil and Australia. BTG Pactual expects a sharp deterioration in profitability across both businesses, although it sees scope for a recovery in the final three months of 2026.
According to a research report published on Thursday (October 22), Brazilian beef export volumes fell approximately 22% in the third quarter from the previous three months. The slowdown is expected to hit Friboi particularly hard. The business accounts for roughly 70% of JBS Brazil’s revenue, with exports representing about half of its sales.
BTG estimates that if Friboi’s shipments declined broadly in line with overall Brazilian beef exports, the resulting revenue headwind could amount to approximately 8% of the division’s total sales. The impact on profitability could be more pronounced because export sales typically command higher margins than those in the domestic market.
The bank forecasts adjusted EBITDA of $182 million for JBS Brazil in the third quarter, down 32% sequentially. Its EBITDA margin is expected to narrow to 4.4% from 5.9% in the second quarter, a contraction of 1.5 percentage points.
Australia faces similar pressures. The country’s beef export volumes declined approximately 8% quarter-on-quarter, while rising cattle prices added to production costs. BTG expects JBS Australia’s EBITDA to fall 29% to $164 million, with margins narrowing to 6.7% from 9% in the previous quarter.
Recovery Could Begin in the Fourth Quarter
Although China’s import quotas remain in place, BTG expects exporters to resume shipments during the fourth quarter for delivery under the 2027 quota. This could ease the disruption affecting JBS’s Brazilian and Australian operations and support a sequential earnings recovery toward year-end.
In the United States, the outlook for JBS’s beef business is also beginning to improve. After several quarters of pressure on profitability, JBS US Beef is expected to return to positive EBITDA, reaching an estimated $31 million in the third quarter. Its margin is forecast at 0.4%, compared with a negative 1% in the second quarter.
The improving outlook for US beef contrasts with continued weakness in poultry and pork.
BTG expects Pilgrim’s Pride, JBS’s US-listed poultry subsidiary, to report a 6% sequential decline in EBITDA to $473 million, while JBS’s US pork operations are projected to post a 14% drop to $101 million.
In Brazil, Seara is also expected to face tighter margins as increased domestic pork supplies and weaker poultry processing spreads in both domestic and export markets weigh on profitability. BTG forecasts EBITDA of $331 million for the division, down 13% quarter-on-quarter.
BTG Maintains Buy Rating Despite Earnings Pressure
Across its global operations, JBS is expected to report adjusted EBITDA of $1.28 billion for the third quarter, a 30% decline from a year earlier and a 10% drop from the previous quarter, according to BTG. The consolidated EBITDA margin is forecast to fall to 5.5%, compared with 8.1% in the third quarter of 2025.
Despite the weak earnings outlook, the bank maintains its Buy rating on JBS, with a 12-month price target of R$100 per share. That implies potential upside of approximately 60% from the R$62.67 reference share price used in the report.
BTG believes some of the pressures facing JBS are temporary, particularly the disruption to beef shipments to China and the historically weak profitability of its US beef operations. However, the bank cautions that a sustained earnings recovery across the broader animal protein industry remains uncertain.
Poultry and pork margins are expected to remain under pressure as their respective industry cycles turn, while early signs of cattle retention in Brazil could begin to weigh on beef processors’ profitability.
For BTG, JBS remains a relatively attractive investment within the animal protein sector, supported by its valuation over a normalized earnings cycle. Still, the bank sees the company primarily as a relative-value opportunity rather than a standout source of investment returns, pointing to more compelling opportunities elsewhere in its coverage.
Leave a Reply