Brazil Stocks Slip on Earnings, Santander Outlook; Ipsa Drops

By Alexander Ragir

Nov. 14 (Bloomberg) -- Brazilian stocks fell, extending a weekly decline, after the largest homebuilder cut its sales forecast and Banco Santander SA said shares may not rally until next year because the slowing economy is reducing earnings.

Cyrela Brazil Realty SA Empreendimentos & Participacoes slid to its lowest price in three years after the homebuilder's profit fell 20 percent in the third quarter. Lojas Americanas SA led a drop in retailers after JPMorgan Chase & Co. said Brazil's biggest discount merchant will be hurt by ``sharp drops'' in consumer credit before the holiday season.

The Bovespa slipped 0.7 percent to 35,745.70 at 9:11 a.m. New York time. The BM&FBovespa Small Cap index sank 1.2 percent. The BM&FBovespa MidLarge Cap index slipped 0.4 percent. Chile's Ipsa was little changed.

Cyrela led declines for homebuilders, falling 7.2 percent to 7.20 reais. Third-quarter net profit of 72.4 million reais ($31.3 million) missed the 138.3 million-real average estimate in a Bloomberg survey of three analysts.

Cyrela cut its forecast for contracted sales and new projects in 2008 because of ``uncertainties about the impact of the economic crisis on Brazil's economy.'' Gafisa, Brazil's second-biggest homebuilder, lost 4.8 percent to 8.89 reais.

Brazilian stocks are unlikely to gain until next year because the slowdown in the domestic economy may last until the fourth quarter of 2009, Santander said.

The first half of next year may be ``the most likely time to adopt a more aggressive investment approach,'' wrote Santander analyst Marcelo Audi in a note to clients. ``Our earnings forecasts are also deteriorating fast, led by our recent downward revision of macro forecasts and the continued deterioration in the global economic scenario.''

Retailers Drop

Lojas Americanas dropped 6.1 percent to 5.73 reais. The company was cut to ``neutral'' from ``overweight'' at JPMorgan.

``From sharp drops in consumer confidence to a steep decline in consumer credit supply, all economic indicators are pointing to a demand deceleration ahead of the holiday season and 2009, especially in Mexico and in certain categories in Brazil,'' wrote JPMorgan analysts Andrea Teixeira and Thiago Queiroz in a note.

B2W Cia. Global do Varejo, Brazil's biggest Internet vendor, fell 4.2 percent to 25.77 reais. Earnings at B2W and Lojas Americanas would be the most hurt by tighter credit, the analysts wrote.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.