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Odontoprev Falls Most in 11 Weeks as Profit Misses Estimates

Feb. 27 (Bloomberg) -- Odontoprev SA, a Brazilian dental benefits company, fell the most in 11 weeks after reporting fourth-quarter profit that missed analysts’ estimates, prompting Deutsche Bank AG to cut the stock to sell.

Shares dropped 4.1 percent to 9.35 reais at the close of trading in Sao Paulo, the steepest one-day slump since Dec. 13. It was the second biggest decliner in the Bovespa’s small-cap index after Eletropaulo Metropolitana SA. Trading volume on the stock was almost seven times the daily average over the past three months, according to data compiled by Bloomberg.

Odontoprev’s adjusted net income was 27.1 million reais ($13.7 million) in the fourth quarter, according to data compiled by Bloomberg after the company released results yesterday. The average estimate of eight analysts was 42.1 million reais.

“As the cost-related miss seems structural, the fourth quarter could have more serious implications for future years, potentially driving strong downward revisions,” Banco BTG Pactual SA’s analysts Joao Carlos Santos and Pedro Montenegro wrote in a research note to clients today, calling the results “dismal.”

Santos and Montenegro reiterated their sell rating on the stock. Josh Milberg, an analyst at Deutsche Bank AG, cut Odontoprev to sell from hold and reduced the target price 26 percent to 8.5 reais today.

“OdontoPrev should price more aggressively in 2013 and focus on cost containment but we don’t expect this to fully offset the pressure from higher dental costs it has been experiencing,” Milberg wrote in a research note.

The Barueri, Brazil-based company’s shares have dropped 17 percent since reaching this year’s high on Jan. 7 while the Bovespa benchmark index has fallen 7.5 percent.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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