The 63 companies in the benchmark Bovespa index are forecast to post combined net income of 37.8 billion reais ($18.5 billion), according to analyst estimates compiled by Bloomberg. That would be a gain of 79 percent from the second quarter, when most companies on the gauge missed estimates. Localiza Rent a Car SA will kick off Brazil’s earnings season on Oct. 15, when the car-rental company is expected to post a sevenfold increase in profit to 77.5 million reais, according to the median of five estimates compiled by Bloomberg.
Companies getting most of their revenue from the domestic market, including consumer-goods maker Hypermarcas SA (HYPE3) and food processor BRF Brasil Foods SA, are benefiting as central bankers cut borrowing costs and President Dilma Rousseff’s administration reduces taxes on payrolls and consumer goods. Brazil’s unemployment rate unexpectedly dropped in August, while the economic activity index, a proxy for gross domestic product, increased more than forecast in July. Retail sales rose for the third month in a row in August, climbing more than economists expected, the national statistics agency said today.
“The economy is in the middle of a recovery process, and the third-quarter earnings reports should be better than in the second, that’s for sure,” Hamilton Moreira, an equity strategist at Banco do Brasil SA, said in a phone interview from Sao Paulo. “That’s particularly true for companies that depend more on domestic demand, such as retailers and homebuilders.”
Hypermarcas, which makes more than 190 products as varied as condoms and nail polish to the generic forms of Valium and Claritin, is expected to post an 83.2 million real profit when it reports earnings next month, the average of three estimates. That compares with a loss of 29.9 million reais in the second quarter and 190.5 million reais a year earlier. Shares of Sao Paulo-based Hypermarcas rallied 90 percent this year before today, the best gain on the Bovespa (IBOV) index.
Hypermarcas declined to comment on its third-quarter earnings. Localiza didn’t respond to an e-mailed request for comment.
Sao Paulo-based Brasil Foods, which gets almost 60 percent of its revenue from the domestic market, is forecast to report a 20-fold gain in profit from the second quarter to 128 million reais, according to the average estimate of three analysts.
Brazil’s central bank, led by President Alexandre Tombini, yesterday cut the benchmark lending rate for the 10th straight time in another attempt to shore up growth. In a split decision, the bank’s eight-member board reduced the Selic rate by a quarter point to 7.25 percent, as forecast by 35 of 73 economists surveyed by Bloomberg.
Investors will be paying close attention to third-quarter reports amid continuing concern about global and Brazilian economic growth, said Marc Sauerman, who helps oversee 650 million reais at J Malucelli Investimentos.
In the second quarter, Brazilian companies missed analysts’ revenue estimates by the most since 2009. Thirty-six of the 58 companies listed on the Bovespa index and tracked by Bloomberg reported earnings that trailed forecasts
“A lot of companies disappointed in the second quarter -- there’s no guarantee it won’t happen again,” Sauerman said in a telephone interview from Curitiba, Brazil. “The market will be watching companies’ earnings reports to see if these numbers really back up the idea that the economy is improving.”
State-run oil producer Petroleo Brasileiro SA (PETR4), Brazil’s biggest company by market value, had a loss of 1.35 billion reais in the second quarter, its first quarterly loss since 1999, trailing the median estimate for a profit of 2.94 billion reais in a Bloomberg survey of nine analysts.
Rio de Janeiro-based Petrobras is expected to have a 10.8 billion-real profit in the third quarter, the median of two estimates.
Profit at commodities and oil producers will probably take longer to rebound because they suffer more as the world economy slows, said Saulo Sabba, who helps manage 500 million reais as a director at Banco Maxima SA.
Vale SA (VALE3) is forecast to report net income of 4.29 billion reais in the third quarter, a 19 percent drop from the previous three months. Vale has declined 5.2 percent this year, compared with a 3 percent increase for the Bovespa index.
While shares of raw-material producers will likely keep underperforming the Bovespa in the short term, companies focused on the domestic market may rebound following third-quarter earnings results, Sabba said.
“Some of the companies that benefit the most from the government’s stimulus, such as homebuilders, have underperformed the Bovespa this year,” he said. “If the third quarter does bring some improvement to their earnings, it could trigger a rebound.”