Consensus is at 13% EPS growth for Brazil in 2012. Different from Chile, we are more
concerned that risk may be to the downside in Brazil, just as it happened in 2011 when
earnings were subject to sharp downward revisions. Although expectations for sales
growth seem to be properly aligned with current expectations for GDP growth,
expectations for 2012 GDP growth have been on a downward path and could still go lower,
in our view.
EPS growth of 13% for Brazil may not seem too ambitious on the surface, but it may be
hard to achieve considering that: (i) Mining is unlikely to replicate the strong upward
contribution to growth from 2011, (ii) expectations for several domestic cyclical sectors,
such as Consumer and Real Estate are still at high levels and may be subject to
downward revisions, and (iii) high wage growth may pressure margins, especially for more
labor intensive industries, aggravated by the large minimum wage increase planned for the
start of 2012.
Question: possible inflection point in mid-2012?
Source: Bloomberg, Credit Suisse