Cielo S A (OTCMKTS:CIOXY)
Shares of Cielo S A (OTCMKTS:CIOXY) gained 11.4% after the Brazilian credit and debit card operator reported better than expected third quarter financial results. Net income in the quarter exceeded R$1 billion as net margin expanded 1.8% year-over-year.
Q3 Financial Results
The better than expected third quarter financial results helped strengthen investor confidence in the stock after coming under pressure in recent weeks. However, the stock continues to trade in a downtrend after losing more than 15% in market value since August. The stock is currently trading near the $7 a share mark, which acts as a key resistance level.
Third quarter financial results underscore Cielo S A (OTCMKTS:CIOXY) recovery after its operational profit missed estimates in the second quarter. Lower equipment fees and falling proceeds from financial transactions had initially spooked investors.
Growth in net income follows a reduction in expense and capital spending in the quarter as the payment processor embarked on a cost-cutting drive. In the second quarter, Cielo S A (OTCMKTS:CIOXY) slashed money earmarked for buying payment processing equipment to between 150 million Brazilian Reals and 200 million Reals from 400 million Reals.
Transaction Volume Increase
Total expenses in the third quarter shrank 0.3% as the company aligned its efforts to deliver more efficiency. EBITDA margin, on the other hand, contracted 0.8% year-over-year. Cielo’s S.A financial volume was up by 10.3% in the quarter, compared to the corresponding period last year. Excluding the Agro-product that is normally affected by seasonal factors, financial volume grew 11.3% year over year.
“We reiterate our commitment to the operating efficiency pillar, with total expenses shrinking by 0.3% year-on-year in 3Q17 in the first nine months. Investments in POS terminals totaled R$120 million in the first nine months and should post a mild pickup in the next quarter with the rollout of new solutions,” Cielo S A (OTCMKTS:CIOXY) in a statement.
Cielo S A (OTCMKTS:CIOXY) remains confident of posting stellar financial results for the full year as competition from smaller firms in the sector continues to ease. Declining competition should mitigate the impact of declining base of point-of-sale machines. However, recession that has triggered massive store closures continues to pose the biggest headwind, heading into the year-end.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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