Downside earnings revisions remain a risk in Brazil during the second half of this year, although such moves are likely to be moderate in magnitude, strategists at Santander Investment Securities led by Daniel Gewehr said in a note to clients On Wednesday. "Investors believe sell-side 2013 and 2014 estimates are aggressive and should be slightly reduced, as shown by our investor poll ... we agree with investors' opinion, and believe we could see small declines in our estimates," the note said.
Second-quarter earnings in Brazil came slightly below expectations, with more than 45 percent of the companies polled by Thomson Reuters posting lower-than-expected sales and net income growth on a quarter-on-quarter basis. On an annual basis, earnings rose in the single-digit territory, despite the weak base of comparison from 2012.
Markets are currently pricing 1 percent of inflation-adjusted earnings growth in Brazil for this year, below the 2.4 percent, six-year average in earnings growth. The benchmark Bovespa index is set to continue underperforming second-tier indexes such as a gauge for performance of shares with small or mid-sized market value, Gewehr and his team said.