The Brazilian company that makes more than 5,000 food products from frozen pizzas to lasagnas jumped to a record after its profit beat analysts’ estimates, bolstering the Ibovespa.
BRF SA rallied to the highest in 18 years, pacing gains in the stock benchmark, which rose the most in the world. Earnings for the gauge’s companies exceeded forecasts by an average 30 percent in the second quarter, even with Latin America’s largest economy heading toward the worst recession in 25 years.
“Some Brazilian companies have been reporting surprisingly good earnings, and that’s boosting their stocks,” Marco Aurelio Barbosa, the head of equity research at CM Capital Markets, said in a telephone interview from Sao Paulo. “However, that doesn’t necessarily mean great news as the economic scenario is still very negative.”
Brazilian equities have tumbled 12 percent from this year’s peak in May as President Dilma Rousseff struggles to tame above-target inflation, revive the economy and keep the nation’s investment-grade status. While BRF’s earnings jumped 33 percent last quarter on exports, Chief Financial Officer Augusto Ribeiro Jr. said the results could have been stronger with the economy in better shape.
The Ibovespa rose 1.9 percent to 50,864.77 at the close of trading in Sao Paulo, bringing this week’s advance to 3.3 percent. It fell 4.2 percent in July. BRF extended a four-day rally. The real led world losses, sinking to a 12-year low.
The weakening currency helped spur a rally in exporters including planemaker Embraer SA, which gets most of its revenues from abroad. The company also climbed after HSBC Holdings Plc recommended buying the shares. Retailer Magazine Luiza SA surged 32 percent, while drugstore chain Raia Drogasil SA jumped as sales beat forecasts.
Stocks rose even after data showed the budget deficit before interest payments last month was wider than economists forecast, as the government struggles to avoid a credit downgrade. The economic slowdown has complicated Finance Minister Joaquim Levy’s pledges to cut expenses and boost taxes, forcing him last week to reduce fiscal targets. Standard & Poor’s responded by cutting its outlook for Brazil.
“The numbers are just awful, and the release certainly adds to speculation that rating companies will take some action,” Barbosa said.
S&P this week moved a step closer to cutting the nation’s credit rating to junk after changing the outlook on its BBB-rating to negative from stable. Moody’s Investors Service, which met with officials in Brazil this month, has a negative outlook on the country’s Baa2 rating, the second-lowest level of investment grade.
Gol Linhas Aereas Inteligentes SA, the Brazilian airline that has 64 percent of its debt denominated in foreign currency, extended this month’s slump to 23 percent.
Trading volume of equities in Sao Paulo was 6.69 billion reais ($1.96 billion), according to data compiled by Bloomberg. That compares with a daily average of 6.71 billion reais this year, exchange data show.