Analyst upgrades Brazilian power company CPFL Energia to ‘Outperform,’ shares jump

CPFL Energia shares climb after analyst upgrade

NEW YORK — Shares of CPFL Energia SA climbed on Tuesday as an analyst upgraded the Brazilian power company, citing expectations for strengthened sales and better economic conditions.

In afternoon trading, U.S.-listed shares of the company rose $2.63, or 4.6 percent, to $60.04.

Raymond James analyst Ricardo Cavanagh raised his rating on the company to “Outperform” from “Market Perform,” with a 2010 year-end price target of $70.60.

Cavanagh noted that in the first nine months of the year demand in the company’s residential and commercial segments grew 6 percent and 5 percent, respectively, in spite of lackluster economic conditions.

“Growth should be aided next year by strengthened sales in auto, real estate and consumer-related sectors; a stronger employment market; (and) increased availability of credit at relatively low rates for historical standards,” he said.

Cavanagh called CPFL one of the most profitable Brazilian utilities, delivering a 26 percent average return on equity between 2004 and 2008 and offering one of the highest dividend yields.

He raised his estimate for 2010 earnings per American depository share to $5.40 from $4.53, citing increased sales volumes at the distribution unit, propelled by an expected recovery of electricity demand and increased generation capacity.