SBS

The thesis

Sabesp's American depositary shares (ADS) are more likely to lag the S&P 500 over the next three months. Third-quarter operating profit recovered, but net income fell 35.7% on financing costs, and the shares trade below both their 50-day and 200-day averages. Lula's term begins on 5 January 2027, and the fourth-quarter 2026 report, expected around March 2027, shows whether operating gains reach net income.

Sabesp reported the third quarter of 2026 on 5 November 2026. EBITDA (earnings before interest, taxes, depreciation and amortization) rose 29.7% to BRL 3.982 billion (Brazilian reais), and the margin widened to 39% from 33% a year earlier (Sabesp results via EuQueroInvestir, 5 November 2026). Net income fell to BRL 1.388 billion from BRL 2.159 billion, and net margin fell to 14% from 23%.

The drop came below the operating line. Costs and expenses rose only 2.0% to BRL 2.433 billion. The financial result swung from a BRL 707 million net gain in the third quarter of 2025 to a BRL 1.222 billion net expense. Panabee reports that adjusted net income fell about 14%, because the year-earlier quarter included a BRL 1.5 billion court-ordered (precatórios) gain.

The shares closed at $4.84 on 12 November 2026, after a 52-week closing low of $4.42 on 3 November 2026. The post-runoff selloff on 26 October 2026 is the backdrop: Brazil's Ibovespa index fell 13.88% to 176,608 points and Sabesp's São Paulo-listed shares (SBSP3) fell 20.98% (Bloomberg Línea).

Bullish and bearish views on COMPANHIA DE SANEAMENTO B SICO DO ESTADO DE SAO PAULO-SABESP ADS'S

The bull case on COMPANHIA DE SANEAMENTO B SICO DO ESTADO DE SAO PAULO-SABESP ADS'S (SBS), in brief: operating costs stopped climbing. The bear case: profit fell for a second straight quarter.

Bull case

• Operating costs stopped climbing. Third-quarter 2026 costs and expenses rose 2.0% to BRL 2.433 billion, while EBITDA grew 29.7% to BRL 3.982 billion at a 39% margin (EuQueroInvestir, 5 November 2026).
• Revenue keeps growing. Net revenue rose 7.6% to BRL 10.141 billion in the third quarter of 2026, and sanitation services revenue rose 5.6% to BRL 6.449 billion (EuQueroInvestir, 5 November 2026).
• Much of the profit drop is a comparison effect. Panabee reports adjusted net income fell about 14% in the third quarter of 2026, against a 35.7% fall in reported net income, because the year-earlier quarter held a BRL 1.5 billion court-ordered gain (5 November 2026).
• The state still backs the privatization. Governor Tarcísio de Freitas, who led the 2024 privatization, won re-election in the first round on 4 October 2026. Sabesp's concession and tariff rules are set at state level.
• The ADS held above its low through the report. The close was $4.84 on 12 November 2026, against $4.56 on 5 November 2026, the day of the results, and the three-month price change is 5.2%.

Bear case

• Profit fell for a second straight quarter. Third-quarter 2026 net income fell 35.7% to BRL 1.388 billion, after a 31.4% fall to BRL 1.46 billion in the second quarter (Sabesp results, 13 August 2026 and 5 November 2026). Benzinga reported adjusted earnings of $0.06 per ADS, down from $0.07 a year earlier (5 November 2026).
• Financing costs now outweigh operating gains. The third-quarter 2026 financial result was a BRL 1.222 billion net expense, against a BRL 707 million gain a year earlier (EuQueroInvestir, 5 November 2026).
• A critical federal government takes office. Lula won the runoff with 51.76% of valid votes and his term begins on 5 January 2027 (Al Jazeera via Archyde, 26 October 2026). Sabesp was privatized in 2024 under a state government that opposed him.
• A weaker real cuts the dollar value. Sabesp earns in reais. On the evening of 25 October 2026, CME dollar futures rose about 10% against the real (Rio Times).
• More shares are in circulation. The EMAE merger gave holders 1.3195 Sabesp shares per EMAE share, credited on 27 October 2026 (Sabesp 6-K filings, 16 September 2026 and 9 October 2026).

Price setup

The ADS closed at $4.84 on 12 November 2026. That is 32.4% below the 52-week intraday high of $7.16 set on 21 April 2026. The 52-week closing low is $4.42, set on 3 November 2026.

Closes since the results have stayed in a narrow range, from $4.56 on 5 November 2026 to $4.98 on 11 November 2026. The 50-day average is $5.45 and the 200-day average is $5.62, both above the last close, so the shares have not recovered the levels that held before the runoff.

The three-month reference close is $4.60 on 14 August 2026, which puts the three-month gain at 5.2%. The market has priced in a federal policy risk and a weaker real: the shares sit about a third below their April high even though third-quarter EBITDA rose 29.7%.

No insider sales appear in SEC filings. The company's only recent filing on the SEC list is its 20-F annual report of 29 April 2026.

Catalysts ahead

• 5 January 2027: Lula's fourth presidential term begins. The new government's first measures show federal policy toward privatized sanitation and Sabesp's concession.
• ~March 2027 (est.): Fourth-quarter 2026 results. Shows whether third-quarter operating gains reach net income once the year-earlier court-ordered gain is out of the comparison.

What would change the view

A daily close above $5.63, just over the 200-day average of closes, would show the shares leading the S&P 500. Fourth-quarter 2026 net income above the year-earlier quarter would also show the shares leading.

What it trades with

The ADS trades as a Brazil macro instrument more than a defensive utility. On 26 October 2026, SBSP3 fell 20.98% and Copasa fell 23.74%, alongside the Ibovespa's 13.88% drop (Bloomberg Línea). Close co-movement with the iShares MSCI Brazil ETF (EWZ), Copasa and the BRL/USD rate follows from that session. Sabesp's third-quarter financial expense ties profit to Brazilian borrowing costs, so domestic interest rate moves feed through to earnings.