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Brazil ADRs Post Earnings Surprises

Stocks in this article: BBD VIV ITUB

NEW YORK ( TheStreet) -- Among the major Brazil American depositary receipts, Banco Bradesco (BBD) and Vivo Participacoes (VIV), the two companies to have announced their results, surpassed analysts' estimates.

Second-quarter profits of Banco Bradesco, the second-largest private sector bank, reached 2.46 billion reais ($1.39 billion) from 1.99 billion reais a year earlier. The quarterly profits came above the 2.26 billion reais consensus estimates of analysts polled by Bloomberg.

"The decline in bad debt provisions was a big factor helping to boost results," said Chief Financial Officer Domingos Abreu during the conference call Wednesday. The bank maintained its guidance for credit portfolio growth at 25% for 2010. As noted in the smart investment guide to Brazil, Brazil banks will benefit from improving credit quality and delinquency rates in both individual and commercial loans.

Banco Bradesco's ADR closed 4.9% higher on Wednesday. In comparison, Itau Unibanco Banco Holding (ITUB) and Banco Santander (BSBR) were up 2.5% and 0.4%, respectively.

On Wednesday, Vivo Participacoes said earnings per share were 0.591 reais, above the 0.555 reais consensus estimates of analysts polled by Bloomberg, providing a 6.5% surprise. Additionally, sales of 4,402 million reais were 2.4% above analysts' estimates.

The earnings before interest, taxes, depreciation and amortization margin of the company increased to 30.5% during the quarter, compared with 30.1% a quarter earlier and 30.3% in the prior year. The company's market share reached 30.24%, up from 30.12% during the first quarter of 2010, and 39.33% in the second quarter of 2009.

Vivo closed up 3.5% during Wednesday's trading on the New York Stock Exchange. Its main competitor, TIM Participacoes (TSU), was up 1.7% on Wednesday.

Telefonica (TEF) has reached an agreement to buy with Portugal Telecom's (PT) stake in Vivo for $9.77 billion, according to reports. Telefonica and Portugal Telecom each own a 50% stake in Brasicel, which holds a 60% share in Vivo.

Earnings to Watch

Vale (VALE) is scheduled to announce its earnings Thursday and Gafisa (GFA) is scheduled to announce results on Friday.

Vale is expected to report record earnings for the second quarter on higher iron ore prices, responsible for nearly 61% of the company's revenue. Earnings per share could reach the second highest level, after the third quarter of 2008, in the company's history.

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