Driven by the sharp rise in commodity prices at the beginning of the year, the profit of companies with shares listed on the Stock Exchange jumped almost 85% in the first quarter of 2022, compared to the same period last year.
Publicly traded Brazilian companies reported a consolidated profit of BRL 170 billion from January to March this year, against BRL 92.5 billion in the same range in 2021 (in nominal values, excluding inflation), an increase of around 83.5%, according to a survey by the Economatica platform.
Among the biggest profits in the period, three major commodity exporters —Petrobras (which saw profits jump more than 3,700% on an annual basis, to R$44.5 billion), Vale and Suzano— stand out ahead of the others, in a scenario of pressured inflation on a global scale in the wake of the rise in raw material prices.
​The profits of large banks, which benefit from a scenario of high interest rates, with increased profitability in portfolios, were also among the positive highlights in the first quarter.
On the other hand, consumer and retail companies reported, on average, results considered weak by analysts, given an economic activity that shows difficulties in starting a more consistent recovery.
The civil construction sector, which sees demand slow down with the rise in the Selic rate and, consequently, in real estate financing, also appears among the negative highlights of the balance sheet season.
Both in the case of retail companies and construction companies, the increase in inputs, and the difficulty of making the full transfer to the final customer in an environment of still fragile economy, also contributed to the weak results.
About 60% of companies reported profits that exceeded market analysts’ estimates.
According to an analysis by XP, in general terms, the numbers presented came, for the most part, above expectations, with around 60% of companies with operating income exceeding expectations indicated by the consensus of market analysts.
Stock strategist at XP, Jennie Li says that, in addition to the great positive highlight for commodities, banks, and in particular Itaú and BB (Banco do Brasil), were the ones that stood out the most in relation to expectations, with robust expansion of credit portfolios on more profitable lines, such as credit cards.
Santander, on the other hand, delivered the results considered weaker in comparison with its peers, with only modest growth in profit in the period, adds Victor Penna, an analyst at BB Investimentos.
Specialists believe that the point of attention that remains for the next balance sheets in the case of financial institutions is in relation to how the advance of default will occur, in a scenario of still high inflation and high interest rates.
The XP analyst also states that the shopping mall sector, with names such as Iguatemi and BR Malls, which benefited from the reduction of restrictions on the movement of people in recent months, also appears among the positive highlights.
Especially in the case of those more focused on high income, with stores like Arezzo, Grupo Soma and Vivara, in which customers’ purchasing power ends up showing greater resilience than average, adds the specialist.
More comprehensive e-commerce companies, in turn, felt the impacts of the slow pace of recovery in economic activity, such as Magazine Luiza and Via.
“With the likely continuation of the cycle of high interest rates, in the face of persistent inflation, retailers tend to follow with the numbers more pressured in the coming quarters”, says Jennie.
Still within the theme of returning to mobility, Penna, from BB Investimentos, highlights the numbers considered positive by car rental companies, such as Movida and Localiza.
Also in the transport sector, the analyst continues, airlines, although they have experienced an increase in passenger demand, have generally suffered from the rise in fuel prices, with results classified as neutral.
Penna also says that, among the producers of commodities, in addition to the main highlight for the strong increase in Petrobras’ profit, in the wake of the high price of oil in the international market, Gerdau also managed to present numbers considered positive, driven by the operation in the United States. United.
The analyst also adds that he was positively surprised by the performance presented by Suzano, which knew how to make use of the high pulp and derivative strategies to protect itself from exchange rate volatility.
Cost pressure and difficulty in passing on to consumers penalized builders and retailers
“Overall, the numbers came in line with what we were expecting, which, in itself, we see as good news, given so many uncertainties in the scenario, with the high interest rates abroad and the war in Ukraine” , says Pedro Serra, head of research at Ativa Investimentos.
Construction companies in general, with a negative emphasis on Tenda’s numbers, and companies in the consumer sector, such as BRF, are pointed out by the specialist as among those that suffered the most from the increase in costs linked to raw materials, such as steel. and grains for animal feed, respectively, and the difficulty of fully passing them on to consumers.
Health care companies, such as Hapvida and Rede D’Or, also showed numbers considered negative by analysts, with the increase in Covid-19 cases in the first quarter and the loss ratio still generating pressure on the costs of operations and erosion of margins. .
Among the positive points of the season, Serra points out the education sector, with emphasis on Yduqs, which, like the malls, has also been able to take good advantage of the reduction in mobility restrictions and the return to classrooms.
The Ativa specialist believes that, considering only the results reported in the first quarter, the local Stock Exchange should be at a level even above what it is currently, around 110 thousand points.
“External factors, however, such as the tightening of monetary conditions on a global scale, the new lockdowns in China, and the conflicts in Eastern Europe, with the outflow of foreign capital from the local market in recent weeks, end up putting negative pressure on shares,” he says. Mountain range.
In the same vein, Penna, from BB Investimentos, says that at the moment he does not see triggers that could take the stock market to levels far above current levels. “In terms of multiples, there are some companies with very dented stocks, but I don’t see the market pricing in an improvement on account of the balance sheets, with a growing fear among investors about the risk of a global recession.”
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
