WEG (WEGE3) Brings ‘Rare Alignment of Growth and Yield’ in Q3 and Stocks Close 8.36% Jump

WEG (WEGE3) published its results for the third quarter of 2022 this Wednesday morning (26), with figures that leave most analysts, once again, optimistic.

As a result, the company’s ordinary shares rose by 8.36%, trading at R$37.98. This in a mostly negative session for the Ibovespa, which closed down 1.62%, at 112,763 points.

“We see the third quarter results strengthening WEG as a rare alignment of growth and returns, with sequential revenue growth and margin recovery as welcome surprises,” said analysts Lucas Laghi and Pedro Bruno of XP Investimentos. .

The company’s net revenue was R$7.9 billion, up 27.6% year-on-year and beating Refinitiv consensus, which forecast revenue of R$7.39 billion R$. Earnings before interest, taxes, depreciation and amortization (Ebitda) amounted to R$1.56 billion, up 37.1% year-on-year and in line with projections. Finally, the net profit of R$1.16 billion increased by 42.5% compared to the same period in 2021 and was 18.5% higher than expected.

The broker’s specialists point out that the domestic performance of WEG increased by 34% on an annual basis, “reflecting the sustained demand of the local industry, in particular in the sectors related to raw materials”.

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In addition, attention is also drawn, even in Brazil, to the performance of the Generation, Transmission and Distribution (GTD) sector, with an increase of 47% in the same comparison, mainly due to the advancement of solar and wind energy. projects.

Overseas markets, meanwhile, were up 22% from 2021. deteriorating conditions in Europe,” Lahgi and Bruno explain.

Credit Suisse analysts, led by Regis Cardoso, agree.

“WEG published solid results in the third quarter, above the consensus and our most optimistic estimates”, declares the team of the Swiss bank.

For them, the electronic equipment segment, whose turnover increased by 32%, was one of the highlights.

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“In the short cycle, demand remains strong, with the agricultural and mining segments fueling demand in the local market, while WEG continues to have a good order book in overseas markets, including Europe. In the long cycle, oil and gas and pulp and paper continue to drive demand in both local and foreign markets,” they argue.

In addition, the power front also attracted attention.

“The current energy crisis in Europe, with high gas prices and energy bills, has led companies and investors to look for alternatives. We believe energy efficiency will be an important part of the solution, after all, the cheapest and greenest energy is unused energy, and we believe WEG will be a key player in this,” explains- he,

Credit Suisse also draws attention to the fact that the company has seen its margins boosted due to the stabilization of the costs of its raw materials, mainly steel and copper – but also due to the merit of the company. to reduce its costs.

Gross margin was also one of the points identified by JPMorgan as most relevant.

“The gross margin was 30.6%, up 1.7 points over the year, and at the highest level since the first quarter of 2021”, explains the team of the American bank, led by Marcelo Motta. “In addition, international turnovers were 6% above our consensus, up 21% year-on-year to $757 million, and domestic sales in the generation, transmission and distribution sector of electricity increased by 47% on the same basis, to 2.03 billion reais”.

Goldman Sachs, in the lead, points out that the Ebitda margin gained 2.3 percentage points during the quarter, to 19.8%.

Bradesco BBI, in its analysis of WEG’s balance sheet, also mentions the advance of the two margins as a strong point. “The company delivered a strong top-notch performance despite market concerns about Europe and home appliances,” he explains.

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“WEG presented significant revenue and Ebitda margin growth, beating past periods and our estimates, reflecting greater operational efficiency and consideration of lower input costs “, mention the analysts of Eleven.

XP has a buy recommendation for WEG, with a target price of R$45, as well as Eleven, which has a target price of R$52. Credit Suisse defines stocks as surpass (performance above the market average, equivalent to a purchase), with a target of 41 BRL. BBI has a neutral recommendation, with a target of 36 BRL. JP Morgan has a recommendation Overweight (higher than average exposure, equivalent to buying), with a target of R$ 45.

Goldman Sachs is the only institution consulted, which has a sell recommendation for the company’s shares, with a target of R$ 31. Among the negative points of the document, the American bank points out that the international segment GTD fell by 4% on the year, that domestic apparel engine sales were down 12% and levies levied were 18.7%, the highest rate since the third quarter of 2016.

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