Sao Martinho Drops in Sao Paulo as Earnings Trail Estimates

Sao Martinho SA, the owner of the world’s largest sugar-cane processing plant, declined after reporting earnings that trailed analysts’ estimates for a second straight quarter.

The shares dropped 1.8 percent to 25.53 reais at the close of trading in Sao Paulo, snapping two days of gains. The Ibovespa stock gauge advanced 2 percent.

Sao Martinho posted adjusted net income of 12.7 million reais ($5.7 million) for the fiscal fourth-quarter ended March 31, according to data compiled by Bloomberg after the company reported the results late yesterday. The average estimate of six analysts was 26.5 million reais.

While the results will probably “have a marginally negative impact on shares,” Banco Santander SA analysts including Christian Audi reiterated in a research note a buy recommendation, citing the company’s “cheap valuation, better-than-expected guidance for the fiscal 2014 harvest, and a substantial portion of sugar exports hedged at healthy levels.”

The Pradopolis, Brazil-based company forecasts sugar output of 996,000 tons for the 2013-2014 season, compared with 970,400 in the prior period. Ethanol output is projected to rise 43 percent.

Sao Martinho has fallen 8.8 percent this year, while the Ibovespa has plunged 23 percent.

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