Four Brazilian Stocks with Momentum, and More Upside Potential
We recently pointed out that, by and large, Brazilian stocks missed last year's rally. However, steel producers Companhia Siderurgica Nacional (NYSE: SID) and Gerdau (NYSE: GGB) were among the top performing Brazilian stocks over the past six months.
So were airline GOL Linhas Aereas Inteligentes (NYSE: GOL) and bank Itau Unibanco (NYSE: ITUB). And analysts see plenty more upside potential in these four stocks. Below we take a glance at how these stocks have fared, and what analysts expect from them.
Note that some other Brazilian top performers in the past six months include chemical company Braskem, homebuilder Gafisa and miner Vale.
Companhia Siderurgica Nacional
Consensus earnings estimates for the quarter just ended have jumped from $0.09 per share to $0.22 in the past 60 days. The company sports a market capitalization of less than $9 billion, with a dividend yield of about 3.8 percent. Its price-to-earnings (P/E) ratio is slightly less than the industry average.
Note that just one of the six analysts surveyed by Thomson/First Call recommends buying shares. However the mean price target, or where analysts expect the share price to go, is more than double the current share price. Shares have not traded in that neighborhood since June of 2011.
Shares hit bottom in July and climbed to a 52-week high just after Christmas. The share price has pulled back almost three percent since then. Over the past six months, the stock has outperformed the broader markets and the likes of ArcelorMittal and U.S. Steel.
This global steel producer is expected to benefit from infrastructure investments for next year's FIFA World Cup and the 2016 Rio Olympic games. It has a market cap of about $13 billion. The dividend yield is about 0.5 percent, and the long-term earnings per share (EPS) growth forecast is more than 26 percent.
All but one of the six analysts surveyed recommend buying Gerdau shares, with one of them rating the stock at Strong Buy. But they see lots of room for shares to run, as their mean price target is about 67 percent higher than the current share price. The consensus target would be a new multiyear high.
The share price is more than 32 percent higher than six months ago, though shares have traded mostly between $7.60 and $8.20 since October. While the stock has outperformed the S&P 500 and Down Jones Industrial Average over the past six months, it has underperformed Companhia Siderurgica Nacional.
GOL Linhas Aereas Inteligentes
This leading Latin American airline recently reported improved traffic results for last November and forecast a stable outlook for flights in Brazil next year. The market cap is more than $1 billion, but note that both the operating margin and return on equity are in the red. And short interest is more than 13 percent of the float.
For the past three months, the consensus recommendation has been to hold shares of GOL Linhas. Yet the analysts' mean price target is about 25 percent higher than the current share price. Note though that shares were trading higher than that as recently as last May.
Still, the share price is more than 64 percent higher than six months ago, though it is currently below the 200-day moving average. Over the past six months, the stock has outperformed not only the S&P 500, but larger competitors Copa Holdings and LATAM Airlines as well.
Itau Unibanco is in talks to acquire Corpbanca, and thereby expand its footprint in Chile and Colombia. Itau Unibanco has a market cap of more than $65 billion. It offers a dividend yield near 0.6 percent, and its P/E ratio is less than the industry average. The long-term EPS growth forecast is almost 15 percent.
Five of the six analysts polled recommend buying the shares, which has been the consensus recommendation for at least three months. They see plenty of headroom, as the current share price is more than 17 percent below their mean price target. That consensus target is less than the 52-week high.
The share price has retreated more than 13 percent in the past two months, though it is still up about 13 percent from six months ago. In that time, the stock has outperformed peers Banco Bradesco and Banco Santander (Brasil). Its performance has been in line with the S&P 500, though.
At the time of this writing, the author had no position in the mentioned equities.
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