Recent events in global markets have hit Latin American companies hard, with the key Brazilian economy facing a huge decline in the value of its currency and with nations throughout the region having to deal with plunging commodity prices and reduced demand from their trading partners. Those pressures have had a big impact on Panama-based Banco Latinoamericano de Comercio Exterior , or Bladex, and as investors prepare for the bank's third-quarter financial report on Wednesday, they're wondering whether the region's prospects -- and by extension, Bladex's stock price -- might finally have hit rock-bottom and be poised for a rebound. Let's take a closer look at what has been going on with Bladex lately and what investors should watch for in its report.
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Stats on Bladex
Source: Yahoo! Finance.
Can Bladex earnings pick back up?Investors aren't at all certain about Bladex's earnings prospects, and they've been more conservative in their expectations as a result. In recent months, consensus estimates for the 2015 and 2016 years have declined another 5% to 7%, and the stock has taken an even bigger hit, falling 20% since early July.
Much of the damage to Bladex's stock price came after the bank's second-quarter financial report in July. The bank saw operating revenue fall unexpectedly, and earnings not only failed to meet the consensus forecast for growth of roughly 25%, but actually declined year over year as well. Poor results in internal investment returns, key interest rate margins, and the general failure for the Latin American economy to improve as expected were the primary drivers for Bladex's disappointing quarter.
Since then, though, Bladex has done all it can to publicize the pipeline of deals it has put together. The bank has arranged or been part of groups extending credit to borrowers throughout the region, with major transactions with companies in Peru, Honduras, and Ecuador. The loans provide financing for borrowers in the financial and agricultural industries, including one sugar producer and a conglomerate with exposure to banana, dairy, and fertilizer production.
At the same time, Bladex also worked to maintain its own good credit. The bank announced in early September that it had closed a $175 million syndicated loan with Asian lenders in Japan, China, and Taiwan. The loan extends Bladex's previous loan but also extended an additional $72 million in available capital, pointing to the bank's intent to seek out new growth opportunities.
The big question for Bladex remains whether the Latin American economy will begin to pick up steam. On one hand, the bank has made efforts to try to broaden its exposure so as to reduce its reliance on favorable economic conditions in its particular geographic focus areas. Yet a far easier solution would be for Bladex's existing concentration of strength to regain its vigor, and a few positive signs pointing toward a potential recovery have recently started to pop up. In particular, gains in key commodity prices like crude oil and copper during the first week of October have made some investors more optimistic that the markets for basic materials are bottoming out. If that proves true, then Latin American economies across the region will benefit from better prices for the natural resources they provide, and that in turn could lead to a long-awaited turnaround for Latin America and provide more opportunities for Bladex.
In the Bladex earnings report, investors need to keep an eye on how the bank expects to take maximum advantage of a recovery when it comes. Shareholders will like seeing Bladex protect itself from further declines by diversifying its loan portfolio, but at the same time, they'll also want Bladex to capitalize on a rebound in Latin America's prospects. Walking that line is a tough task, but Bladex will need to do so in order to keep the confidence of its investors.
The article Will Bladex Prosper From a Latin American Turnaround? originally appeared on Fool.com.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Bladex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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