Q2 earnings set to show impacts from sluggish Brazilian economy

We are half-way through 2019 and, for companies and investors, it is time to assess earnings once again. But, with official estimates projecting a 0.81 percent growth for the year, the picture of a strong economic recovery painted in January seems a distant memory. And this grim perspective will probably be starkly exemplified in Q2 earnings. 

According to Pedro Galdi, stocks analyst at Mirae Asset, the next earnings season in Brazil is set to show “a very similar trend to Q1, with lackluster results due to the overall scenario.

The economy is still stalling and you can’t expect companies dependent on the domestic market to perform so well, even if there will be some exceptions here and there,” he told

The signals about the real economy differ substantially from the optimism seen in the markets over the past few weeks. With the expected passing of pension reform, more balanced public accounts are on the horizon. The Ibovespa stock market index has been trading at record levels. Even after the peak on 106,000 points, there are investors, like AZ Quest’s Walter Maciel Neto, who believe it could reach 200,000 points within just three years.

This is because, as usual, markets are pricing-in a future scenario with higher margins, as Mr. Maciel explained to Exame magazine. The rationale is that with lower interest rates, the cost of a company’s debts will fall; and since many enterprises went bankrupt in...