(Bloomberg) — StoneCo Ltd., the Brazilian payment-technology firm backed by Warren Buffett’s Berkshire Hathaway Inc., named new senior managers and issued guidance for the current quarter as it works to offset another earnings miss. The stock soared after the announcements.
Fourth-quarter adjusted net income was 34 million reais ($6.8 million), the Sao Paulo-based company said Thursday in a filing. That fell short of the average analyst estimate of 65.2 million reais, the fourth consecutive period that Stone posted a miss.
But investors were willing to look past another earnings disappointment and focus on its recovery. The stock surged as much as 42% in New York Friday, the most intraday on record, with Citigroup Inc. raising the stock to buy and flagging signs of a quicker margin growth. Stone, which provides payments technology for millions of businesses in Brazil, was down 90% from its peak last year as of the market close Thursday, having shed about $26 billion in market value during the period.
Among new executives is head of treasury, Diego Salgado, a former JPMorgan Chase & Co. director for Latin America debt capital markets. Stone also said it expects adjusted income before taxes for the first quarter to top 140 million reais. Chief Executive Officer Thiago Piau, 32, is working to lure back investors after a botched foray into lending and the worsening outlook for Brazil’s economy.
“We were always very aggressive when it comes to growth, but we tried doing too many things at once and lost our management capacity,” Piau said in an interview. “We’re in a new phase in 2022, with new people and a new structure.”
Piau, who has held the top job at Stone since before it went public in 2018, will continue as CEO. Co-founders Andre Street and Eduardo Pontes will remain on the board, and Piau said there are no plans to sell the company or take it private.
“We believe we can gain market share this year and continue growing while improving margins,” he said.
The firm also restructured its credit operation and expects to test the new product by the third quarter, according to Piau.
Investors’ euphoria with Stone rubbed off on other companies in the same sector. Rival PagSeguro Digital Ltd. jumped as much as 23%, the most in two years.
Stone finally signaling margins will improve was a “noteworthy change,” JPMorgan Chase & Co. analyst Domingos Falavina wrote in a report. If the company manages to maintain revenue growth even as it hikes prices, “the thesis will play out strongly.”
(Updates to market open.)
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