Localiza Shares Drop Despite Strong Q1 Profit Results

Localiza’s shares dropped over 6% after it reported Q1 profits of 842 million reais, exceeding expectations of 799.7 million. Analysts at Bradesco BBI see potential for stock recovery driven by rental price increases, despite the stock’s poor performance on the market.

Shares of Localiza, a prominent Brazilian car rental company, fell more than 6% following the release of its first quarter results. This drop placed Localiza among the biggest losers on Brazil’s benchmark stock index, Bovespa, which, by contrast, managed to rise by 0.2%. Investors seemed disappointed, despite the company reporting a net profit of 842 million reais—approximately $149.06 million—surpassing the anticipated 799.7 million reais from an LSEG poll.

Analysts from Bradesco BBI, however, are not so quick to dismiss the company’s performance. They argue that the stock’s decline does not accurately reflect what they consider to be strong quarterly results. Furthermore, they noted expectations of ongoing increases in rental prices, which could positively impact the company moving forward. This suggests that, despite the immediate negative reaction in the stock market, there may be potential for recovery.

In a note to clients, Bradesco BBI stated, “We believe the stock can re-rate as the year progresses and Localiza continues to report the factors listed above.” This reflects a somewhat optimistic sentiment, considering the favorable profit performance and rental market dynamics that could bolster the firm’s financial outlook in the coming months.

In summary, Localiza’s first quarter results yielded a profit that exceeded market expectations; nevertheless, its stock faced a significant decline. Analysts are mixed in their assessment, suggesting that while the immediate market reaction was negative, the ongoing adjustments in rental pricing could provide an opportunity for stock recovery as the year unfolds. With the backdrop of strong quarterly performance, the future remains uncertain yet cautiously optimistic for investors.

Original Source: www.tradingview.com