Brazilian Companies' Q3 Financial Performance

Overview
Investing.com reports that the depreciation of the real had a significant impact on Brazilian companies' financial results for Q3 this year. Analysts at Morgan Stanley provided an assessment comparing local currency performance to dollar-denominated results during the recent earnings season.

Key Findings

• Dollar-Denominated Results:

  • Revenue: 2% drop
  • EBITDA: 5% decrease
  • Earnings Per Share (EPS): 17% increase

• Local Currency Performance:

  • Revenue: 11% growth
  • EBITDA: 8% increase
  • EPS: 33% jump

This issue was not unique to Brazil; other Latin American countries also faced currency depreciation issues. Companies in the region saw a 1% decrease in revenues, 1% drop in EBITDA, and 20% increase in EPS (excluding Argentina's YPF).

Future Outlook

Morgan Stanley does not foresee improvements for Brazilian companies in 2025, citing prolonged high-interest rates as a continuing challenge. Consequently, they have rated Brazilian stocks as "underweight" (sell), favoring stocks linked to better microeconomic indicators:
– Preferred Stocks:
– Petroleo Brasileiro SA PN (BVMF:PETR4)
– Prio SA (BVMF:PRIO3)
– JBS SA (BVMF:JBSS3)
– RUMO Logistica Operadora Multimodal SA (BVMF:RAIL3)
– Adecoagro SA (NYSE:AGRO)
– Nu Holdings (NYSE:NU) LTD BDR (BVMF:ROXO34)
– MercadoLibre Inc (NASDAQ:MELI)
– Totvs SA (BVMF:TOTS3)

Market Reactions

The report also discusses how investors rewarded or penalized companies based on their performance relative to market estimates. Companies that exceeded estimates by 5% had performance in line with the MSCI Brazil index for three days, while those that fell short by more than 5% underperformed the benchmark by 280 basis points.