Shares of Latin American pulp and paper producers that trade on U.S. markets shot up on Monday after eucalyptus pulp maker Aracruz Celulose SA posted first-quarter results that beat Wall Street expectations.
Aracruz, based in Sao Paulo, Brazil, said its first-quarter net profit rose 17.5 percent to $116.9 million, or $1.13 per ADR, up from $99.5 million, or 97 cents per ADR in the same quarter last year. ADRs, or American Depository Receipts, represent foreign companies traded in the U.S.
Revenue grew to $484.2 million from $395.4 million in the year-ago quarter.
The results beat Wall Street expectations with analysts predicting, on average, first-quarter earnings of $1.09 per ADR.
BMO Capital Markets analyst Stephen G. Atkinson said in an interview the company's earnings were largely boosted by a more favorable tax rate, and also by lower costs. Atkinson rates the company "Outperform."
"People are looking for a better quarter next quarter," Atkinson said.
Goldman Sachs analyst Marcelo Aguiar also praised the results in a client note on Monday, saying they beat his own estimate by 32.7 percent.
Aguiar said the broader paper and forestry product sector was improving. He said a combination of supply bottlenecks in Canada, Scandinavia and Indonesia, a weaker dollar and higher energy and wood costs are creating the "perfect storm for market pulp producers in the Northern hemisphere."
The analyst boosted his average eucalyptus price forecasts 7 percent for 2008 and 13 percent in 2009. He called Aracruz and its Brazilian peer Votorantim Celulose Papel SA his top picks among Brazilian pulp and paper companies and rates both companies "Buy."
Shares of Aracruz Celulose gained $3.32, or 4.5 percent, to $76.70.
Shares of Votorantim Celulose added 62 cents, or 2 percent, to $31.75.
The Bank of New York Latin America ADR index gained 2.05 points to close at 444.46.
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