Investors love companies that consistently beat earnings estimates. One that has now done so in three of the past four reported quarters is the rapidly up-and-coming Brazilian fintech Nu Holdings (NU 3.00%). Here's a look at how rapidly the company has been growing, and why it's been topping expectations so routinely of late.
Brazilian blowout
Nu Holdings was quite the standout in the market's latest quarterly earnings season. In mid-August, the company unveiled its latest set of figures, revealing an impressive level of growth in numerous financial metrics, and headline numbers that blew past analyst projections.
For its second quarter, Nu Holdings managed to improve its revenue by a very hearty 60% on a year-over-year basis to $1.9 billion. That, by the way, set a new all-time quarterly record for the company, and it was comfortably above the average prognosticator estimate.
The fintech used several levers to crank the top line higher. It managed to rope in scores of new customers, increasing its count by an impressive 28% to nearly 84 million.
Most of these folks -- 79.4 million, to be exact -- are located in Nu Holdings' home market of Brazil. That tally is an astonishing 49% of the massive South American country's adult population, according to the company. This figure also makes Nu Holdings the fourth-largest financial institution in the nation, an impressive feat given Brazil's enormous size.
While it gains new customers, Nu Holdings also manages to squeeze more spending out of its existing clientele. One encouraging metric in its Q2 report was its growth in monthly average revenue per active customer (ARPAC). This climbed above $9 for the first time, and represented 18% growth year over year.
So with that effective one-two punch of increasing the customer base and getting those people to spend more on its services, Nu Holdings's net income landed at just under $225 million -- quite the dramatic swing from the $22.9 million net loss of Q2 2022. Analysts tracking the company expected a turnaround, but not to this degree -- their average estimate was just under $147 million.
Growth that's both deep and wide
Nu Holdings' offerings are also striking a chord with customers outside of Brazil's borders. Its international presence isn't all that strong yet, but it's growing rapidly. The company managed to increase its client count by 33% in Mexico, to 3.6 million at the end of the quarter. Colombia, meanwhile, might become significant, as client numbers more than doubled to roughly 700,000.
The name of the game for Nu Holdings continues to be expansion on many fronts. The rising ARPAC numbers are due in no small part to successful cross-selling, which can only happen when a business has a critical mass of compelling products and services to sell.
That ball should keep rolling, with new offerings (such as payroll loans for government employees in Brazil) coming down the pipe. Meanwhile, there's plenty more potential in existing ones. Nu Holdings had around 37 million customers with credit cards at quarter's end, a number that was much less than half of its total clientele. Personal loans are also a low-penetration segment, numbering only about 7 million.
Buffett is a believer
Latin America has rarely been seen as a region percolating with financial innovation. Nu Holdings is a company sitting on the cutting edge, and its 21st century products and services are clearly resonating with its target customers.
They're also attracting investors, and not only in the wake of those superb Q2 numbers. Berkshire Hathaway, headed by stock-picking king Warren Buffett, zoomed in on the fintech's potential early. Berkshire was invested in Nu Holdings even before its late 2021 IPO, and isn't letting go -- it currently holds over 107 million shares, more than 2% of the amount outstanding.
NYSE: NU
Key Data Points
Buying and holding, the habit famously practiced by Buffett and Berkshire, looks like the right strategy with Nu Holdings stock. The current average analyst estimate for full-year 2023 profitability is per-share earnings of $0.19, nearly five times the 2022 result. Next year, another leap is expected, by more than 50% to $0.30.
As for revenue, that's forecast to vault from the $4.79 billion in 2022 to $7.52 billion this year before hitting $9.61 billion in 2024. It's hard to find better growth numbers anywhere in the publicly traded financial sector.
