Brazil's Localiza Rent a Car Heads to Record After Earnings Beat Forecasts

Localiza Rent a Car SA, Latin America’s biggest car-rental company, headed to a record close in Sao Paulo trading after earnings beat forecasts.

Localiza gained 3.4 percent to 30.72 reais at 2:02 p.m. New York time, the highest price on a closing basis since the company’s May 2005 initial public offering.

The company said Oct. 8 after the market closed that it had third-quarter net income of 74.9 million reais ($45 million), higher than the median estimate of 62.1 million reais in a Bloomberg survey of three analysts.

“We are confident on the company’s growth prospects,” Renato Mimica and Sara Delfim, analysts at Bank of America Corp., wrote in a note to clients dated yesterday. Localiza “should gain further momentum throughout the next two quarters, delivering significant earnings expansion driven by higher volumes, margin expansion and depressed depreciation expenses.”

Localiza is the second-best performer this year on the IBrX index of Brazil’s 100 most-traded stocks. The company’s shares have risen 59 percent this year as Latin America’s biggest economy grows at the fastest pace in two decades, boosting employment and consumer demand. The real is up 4.8 percent in 2010.

The “market might have partially priced the strong quarter results,” the Bank of America analysts wrote. The stock, which they rate “buy,” trades at 22.3 times next year’s estimated earnings, compared to 10.4 times for the IBrX.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulous@bloomberg.net

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