Earnings season likely to show recovery
The market expects a positive earnings season - suggesting that the economy is recovering normal levels - before companies start releasing second-quarter results on Tuesday, with Neoenergia and Indústrias Romi.Earnings per share of companies that make up Brazil’s benchmark stock index Ibovespa will grow on average 255% compared with the second quarter of last year, a period in which the economy was hard-hit by the pandemic, a survey by XP Investimento shows."The annual comparison of results should be very strong. The consensus is that revenues will rise 42%, Ebitda will be up 70% and profit will increase by 250%," Fernando Ferreira, chief strategist and head of research at XP, said. "It is a lot. The figures require attention." In any case, since this is an expected growth, the effect on the market should be small. "We have already seen some results abroad and stocks have not changed so much because they are taking into account the 2020 [low] base of comparison."Yet earnings of this group of companies are likely to come relatively stable compared with the first quarter of this year. XP has not yet finished the aggregated projection in this base of comparison, but individual analyses of the companies show that the earnings per share should change little and remain strong.Jennie Li, XP's stock strategist, said the earnings season is likely to be marked by the normalization of the companies’ performance. That is, the effect of the pandemic should be less evident in the results. She recalls that when the country entered a firmer path of recovery in the fourth quarter, the earnings per share of Ibovespa companies grew about 100% in relation to the immediately preceding period. This strong base of comparison and the second wave of Covid-19 helped explain the 50% drop in profit in the first quarter. Now, mass vaccination and the easing of mobility restriction measures contribute to a still strong performance, but in line with that already seen last season.The comparison with the second quarter of 2020, which marked the valley of the recession caused by the pandemic, embeds many distortions, therefore. Still, it is worth noting that differences between industries will still emerge. Earnings per share growth for commodity-related companies is likely to be 697%, the XP report suggests; for technology companies, it should be up 157%; for electricity companies, 149%; for industrial companies, 141%; and for financial firms, 79%. But it may still fall...
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