Most Brazilian Stocks Rise as Telefonica Gains on Profit

Most Brazilian stocks gained on optimism that corporate earnings will improve after companies including phone service provider Telefonica Brasil SA reported profits that exceeded analysts’ estimates.

Duratex SA rose to a 10-week high after the wood-panel and bathroom fixture maker reported what Banco Santander Brasil called “its best quarterly results ever.” Card-payment processor Cielo SA jumped to the highest since September after Credit Suisse Group AG raised its recommendation to the equivalent of buy. Centrais Eletricas Brasileiras SA led gains among utilities. Petroleo Brasileiro SA dropped as crude fell to a seven-week low.

The Bovespa index slipped 0.1 percent to 56,617.56 at the close of trading in Sao Paulo. Forty-one stocks advanced on the measure while 25 fell. The real weakened 0.5 percent to 1.9820 per dollar after central bank President Alexandre Tombini said inflation will slow in the second half.

“Corporate earnings we saw today were very good, fueling optimism that this year will be better for Brazilian companies,” Sandro Fernandes, a trader at brokerage Corval, said by phone from Belo Horizonte, Brazil. “And Tombini said inflation will decrease, and decrease naturally, which is even better, because investors are very concerned about the government’s recent intervention. That helped to lift stocks today, too.”

Inflation Outlook

Tombini said at an event today in New York that price increases in Brazil will slow in the second half of the year as the country produces a bumper crop of grains and the real doesn’t weaken as it did last year. “Apart from any major shocks, food inflation should not be as unfavorable as it was last year,” he said. A 14 percent increase in the output of grains in 2013 will help restrain food prices, he said.

President Dilma Rousseff last year reduced taxes on consumer goods, pressured banks to reduce borrowing costs, ordered power utilities and phone companies to cut prices and capped car imports from Mexico to boost domestic demand and tame inflation in Latin America’s biggest economy.

Telefonica rose 3.3 percent to 50.05 reais. The company’s adjusted net income doubled to 3.52 billion reais in the fourth quarter from a year earlier, exceeding the average estimate of 1.24 billion reais among eight analysts surveyed by Bloomberg.

Duratex, Cielo

Duratex gained 2.4 percent to 15.05 reais. Fourth-quarter adjusted net income was 131.3 million reais, according to data compiled by Bloomberg after the company reported earnings on Feb. 22. The average estimate of five analysts was adjusted profit of 107.2 million reais.

Cielo added 1.9 percent to 59 reais.

Eletrobras, as Centrais Eletricas Brasileiras is also known, advanced 3.5 percent to 12 reais. It was the best performance on the MSCI Brazil/Utilities Index, which gained 1.5 percent.

Petrobras, as Petroleo Brasileiro is also known, fell 1.2 percent to 16.95 reais.

The Bovespa has dropped 11 percent from this year’s high on Jan. 3 while the MSCI BRIC Index of shares in Brazil, Russia, India and China slid 3.5 percent over the same period. Brazil’s benchmark equity gauge trades at 11.1 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities, according to data compiled by Bloomberg.

Trading volume for stocks in Sao Paulo was 7.4 billion reais today, data compiled by Bloomberg shows. That compares with a daily average of 7.47 billion reais this year through Feb. 21, according to data compiled by the exchange.

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