JBS 1Q26: Softer Quarter, Sharper Bond Selection
Weaker EBITDA, negative FOCF, and rising leverage narrow the margin for error in an uneven protein cycle
We maintain our Overweight recommendation on JBS, although the trade has become more selective following weaker 1Q26 results and the spread compression observed across the curve since 4Q25. The quarter was clearly softer, with adjusted EBITDA down 33.9% QoQ and 25.8% YoY, free operating cash flow turning to a $1.47 billion outflow, and our adjusted gross and net leverage increasing to 3.66x and 3.11x, respectively. We do not think 1Q26 breaks the broader credit thesis, as JBS remains supported by the scale and diversification of its global protein platform, strong liquidity, continued capital markets access, a manageable maturity profile, and management’s commitment to operate within its 2.0x to 3.0x company-defined net leverage target.
However, the quarter matters for bondholders because JBS used balance sheet capacity to absorb negative free cash flow while also carrying a declared $1.07 billion dividend payable in June. This leaves less room for near-term deleveraging and raises the importance of stronger cash generation over the remainder of 2026. We view refinancing activity as manageable given the company’s liquidity and market access, but paying dividends against a backdrop of negative free cash flow is less supportive from a creditor standpoint. We considered whether the weaker quarter, tighter free cash flow outlook, and leverage above 3.0x on our adjusted metrics justified moving to Neutral. Still, we think the remaining long-end spread pickup compensates investors for the deterioration in cash generation, provided management remains disciplined on shareholder distributions and M&A while free cash flow remains weak.
North America Beef remains the main operating overhang into 2026, while Brazil, Australia, Seara, and U.S. Pork continue to provide important offsets within a still uneven protein cycle. As a result, weaker cash generation and the upcoming June dividend make bond selection more important than it was at 4Q25.
