SAO PAULO, April 1 (Reuters) - Brazilian listed companies could miss earnings estimates for the first quarter after dismal fourth- quarter results as they wrestle with a deep recession, mounting debts and escalating political turmoil, analysts said on Friday.
The earnings reporting season is due to kick off on April 15.
According to Carlos Sequeira, BTG Pactual’s head strategist, companies in the oil and gas, mining, retailing, steelmaking and homebuilding sectors fared worst in recent quarters.
While he did not provide indications on first-quarter performance, he noted that singling out a sector with good results is hard at this point.
Earnings misses by Brazilian companies have increased over the last year despite diminished expectations as the economy slipped into recession two years ago. Analysts at Itaú BBA said that of the 122 Brazilian companies they cover, 37 percent posted earnings misses in the fourth quarter, compared with 18 percent a year earlier.
The share of earnings beats fell to 23 percent from 39 percent in the same period, Itaú BBA said.
“Even as analysts revised their earnings views downwards across the board, fourth-quarter numbers came in at way worse than everyone expected,” said Lucas Tambellini, an equity strategist with Itaú BBA.
While strategists do not rule out positive surprises, especially since annual and quarterly comparison bases have been slashed severely recently, economic and corporate data are keeping analysts wary.
According to estimates compiled by Thomson Reuters on March 17, Brazilian companies could deliver a median profit of 1.20 reais per share in the first quarter, compared with 1.24 reais a share in the previous survey on Feb. 18.
In the month through March 17, analysts made 219 downward revisions to their earnings estimates in Brazil, while raising those for only 94 firms.
Expectations that President Dilma Rousseff could be ousted and replaced by a business-friendly government have driven a strong rally in Brazilian equities this year, although a significant number of investors remain cautious given the weak fundamentals.
Last year, the economy shrank at the fastest pace in a quarter century, and analysts expect it to contract this year and next, marking the longest recession since at least the 1930s.
Domestic interest rates are among the world’s highest, making it harder for factories, farmers and individuals to repay loans.
“Weak results were pegged to leverage issues, with financing costs hampering their bottom line,” said Daniel Gewehr, Santander Investment’s Brazil equity strategist.
JPMorgan Securities, which recently raised its recommendation on Brazilian equities to “overweight,” said the decision was based on the impact of a potential change of regime and valuation issues, not expectations of profit recovery. (Editing by Guillermo Parra-Bernal; Editing by Cynthia Osterman)