E-commerce retailer and fintech provider MercadoLibre Inc. posted better-than-expected profits for the third quarter, signaling it’s on track to keep expanding across Latin America while improving profitability. The shares rallied as much as 17% Friday.
(Bloomberg) — E-commerce retailer and fintech provider MercadoLibre Inc. posted better-than-expected profits for the third quarter, signaling it’s on track to keep expanding across Latin America while improving profitability. The shares rallied as much as 17% Friday.
Net sales for the three months through Sept. 30 jumped to a record $2.7 billion as the company gained market share in its largest market Brazil, according to Chief Financial Officer Pedro Arnt, meeting the average estimate of analysts surveyed by Bloomberg. Operating margins rose to 11%, against the 8.4% forecast by analysts, boosting earnings per share to $2.56.
“Growth of the fintech business has been outstanding and sustained,” helping improve margins, Arnt said in an interview Thursday. MercadoLibre started its financial-services arm in 2003, and it already accounts for over 44% of total revenue.
The Buenos Aires-based company slowed the pace of credit underwriting as it braced for a deterioration in credit quality, with its loan portfolio expanding a modest 4% from a quarter earlier. The percentage of loans more than 90 days overdue grew to about 24% from 18% in the second quarter — in line with estimates from Goldman Sachs Group Inc.
“We pulled back in originations significantly” and don’t anticipate an acceleration by year-end, said Arnt. “We aren’t trying to grow the credit book at any cost.”
Shares were up 9.4% at 12:45 p.m. in New York Friday as investors welcomed the stronger profits and a more prudent approach toward credit.
The company is focused on delivering more robust profitability and was able to navigate a tough backdrop “with price increases and more selective origination,” said Bradesco BBI analyst Joao Andrade.
Despite higher profits, gross merchandise volume was stable from a quarter earlier at $8.6 billion. E-commerce revenues accelerated in Brazil, offsetting a Mexico slowdown, Arnt said.
Shares are still down 52% since peaking amid the pandemic, battered by the rise in US rates. Concern over an increasingly competitive environment in Brazil has also weighed on investor appetite.
Other key points:
- MercadoLibre doesn’t expect a deceleration in its business in Brazil and expects the country to grow at a similar pace in the fourth quarter, according to Arnt
- Payment volume $32.2 billion, estimate $31.8 billion
- Unique active users surpassed 88 million
(Updates with Friday’s trading in first paragraph, analyst comments from the sixth.)
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