JBS Q2 2025 Earnings: A Buying Opportunity Amid Mixed Results and Strong Long-Term Growth Drivers?

JBS S.A. (JBSS3.SA) delivered a mixed Q2 2025 earnings report, with revenue falling short of expectations but earnings per share (EPS) exceeding forecasts by 28.17%. While the stock dipped 3.26% in premarket trading following the release, the company's resilient EBITDA, strategic investments in high-margin prepared foods, and disciplined capital management suggest a compelling case for long-term investors. Let's dissect the numbers and evaluate whether JBS's current valuation offers a compelling entry point.

Resilient EBITDA Amid Margin Pressures

JBS reported adjusted EBITDA of $1.8 billion for Q2 2025, with a margin of 8.4%, slightly up from $1.659 billion in the same period in 2024. This performance underscores the company's ability to maintain profitability despite headwinds in its U.S. beef and pork segments. The poultry division, led by Pilgrim's Pride, achieved record EBITDA, driven by lower grain costs and strong domestic demand. Meanwhile, the Australian business saw a 50-basis-point margin expansion to 12.7%, reflecting improved operational efficiency and higher beef exports.

The company's return on equity (ROE) of 25.7% and return on invested capital (ROIC) of 17% highlight its capital efficiency. These metrics, combined with a net leverage ratio of 2.27x (in line with its long-term target of below 2.5x), demonstrate JBS's financial discipline. However, near-term challenges persist: the U.S. beef business faces a narrow cattle cycle, and pork operations are temporarily impacted by trade restrictions.

Prepared Foods: A High-Margin Growth Engine

JBS's strategic pivot toward prepared foods is a standout driver of long-term value. The company is investing heavily in U.S. facilities, including a $135 million fresh sausage plant in Iowa, $200 million in beef plant upgrades, and a $400 million prepared foods facility in Georgia. These projects aim to capitalize on growing demand for value-added products, which are expected to yield double-digit margins.

The prepared foods segment already shows promise: Pilgrim's Pride's record EBITDA of $87 million in Q2 2025 illustrates the potential of this strategy. With global protein demand shifting toward convenience and branded offerings, JBS's $1.8 billion capital expenditure plan for 2025-2026 positions it to outperform in a fragmented market.

Disciplined Capital Management and Shareholder Returns

JBS's capital allocation strategy reinforces its appeal. The company announced a $400 million share repurchase program and paid $200 million in dividends during Q2 2025, signaling confidence in its valuation. With $3 billion in available cash and $3.4 billion in revolving credit lines, JBS has ample liquidity to fund growth while maintaining a conservative leverage profile.

The company's P/E ratio of 15.32 and EBITDA of $6.61 billion suggest it is undervalued relative to its growth potential. Analysts project a 42% upside to its current price, factoring in the normalization of pork margins in Q3 2025 and a gradual beef cycle recovery by 2027-2028.

Risks and Mitigants

Short-term risks include the avian flu outbreak in Brazil, which temporarily disrupted Ceará's export markets, and global economic uncertainties that could dampen protein demand. However, JBS's diversified global footprint—spanning Brazil, the U.S., Australia, and Europe—mitigates regional shocks. The company's robust biosecurity protocols and disciplined cost management also provide a buffer against operational disruptions.

Investment Thesis: A Buy for the Long-Term

While JBS's Q2 results highlight near-term revenue and margin pressures, its strong EBITDA, strategic reinvestment in high-margin prepared foods, and disciplined capital management create a compelling case for investors. The stock's 3.26% post-earnings dip, coupled with a P/E ratio below industry averages, offers an attractive entry point for those with a 3-5 year horizon.

Key Takeaway: JBS's long-term growth drivers—led by its prepared foods expansion and global diversification—outweigh near-term challenges. For investors seeking a resilient, undervalued player in the global protein market, JBS presents a compelling opportunity.

In conclusion, JBS's Q2 2025 earnings reinforce its position as a value creator with a clear path to outperforming industry peers. While the stock may remain volatile in the short term, its fundamentals and strategic clarity make it a strong candidate for a long-term buy.