What happened
Shares of StoneCo (STNE 2.83%), an international e-commerce service provider, are on the move following a better-than-expected fourth-quarter earnings result. Investors responding to a brighter-than-expected outlook for 2022 have driven the stock 40.1% higher as of 10:25 a.m. ET on Friday.
So what
Earlier this month, investors got nervous after StoneCo pushed back the scheduled announcement of its fourth-quarter earnings results. Net income that only reached 34 million Brazilian reais fell short of the consensus estimate of 65.2 million that analysts who follow the company had predicted.
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The stock is rising today because StoneCo's outlook for the first quarter of 2022 exceeded expectations. The company told investors to expect first-quarter sales to land between 1.85 billion reais and 1.9 billion reais. The average analyst following StoneCo had expected the company to predict just 1.7 billion in first-quarter revenue.
Now what
StoneCo management was incredibly forthright about its disappointment with its own performance in 2021. Steps outlined to improve in 2022 impressed Citi analyst Gabriel Gusan enough to upgrade the stock from neutral to buy this morning.
StoneCo has expanded its management team and reorganized its company into separate operating segments. Now the financial services segment that processes payments for a rapidly growing base of small to medium-sized merchants will have its own leadership team. The expansion is more than justified. In the fourth quarter, the company's payment processing business added 377,700 new clients, bringing its total to 1.8 million.
StoneCo also hired new managers for its relatively new software solutions business. This segment isn't expanding nearly as fast as the payment processing business, but it could become a major source of growth in the years ahead.
