Revenue and Profit Turnaround Drive Movida’s Stock Rally

A slight improvement in Brazil’s Movida’s (MOVI3) second-quarter 2024 financial results excited investors.

The car rental company’s shares were among the highest gainers on the Brazilian stock exchange (B3) on Wednesday, August 7th.

By around 1 PM, Movida’s shares had surged by 16.83%, trading at R$ 7.36. Despite this spike, the stock has still recorded a year-to-date decline of approximately 37%.

Movida reported a net profit of R$ 42.5 million ($7.4 million) between April and June. This reversed a loss of R$ 17.9 million ($3.1 million) in the same period last year.

This turnaround in profitability was significant. The most notable aspects of the company’s financial performance were its revenue and cash generation.

Highlights of Movida’s 2Q24 Financial Results

Revenue Growth

• Net Revenue: Movida’s net revenue increased by 38.6% year-over-year to R$ 3.43 billion ($601.75 million) in the second quarter.
• Seminovos Segment: Revenue from the sale of used cars surged by 47%.
• Fleet Management and Outsourcing (GTF): This segment saw a revenue increase of 46.2% compared to the same period in 2023.
•  Rent-a-Car (RAC): Revenue from the RAC segment grew by 15.8%.

Financial Results

• Annualized Financial Result: The financial result for the second quarter was a negative R$ 547.6 million ($96 million). This is a 4.9% improvement year-over-year. Non-recurring losses of R$ 20 million ($3.5 million) due to a climatic disaster in Rio Grande do Sul, Brazil, impacted this figure.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to R$ 1.14 billion ($200 million). This marks a 29.1% increase from the second quarter of 2023. The EBITDA margin also improved to 69.9%.

Leverage and Profitability

• Leverage: The company’s leverage, measured by the net debt to EBITDA ratio, remained stable at 3.2 times.
• Return on Invested Capital (ROIC): The ROIC for the past 12 months increased by 3.7 percentage points to 11.7% in the second quarter of 2024. Stronger rental yields mainly drove this.

Analyst Perspectives

Analysts highlighted the significant improvement in Movida’s financial performance. The increase in tariffs played a crucial role in the company’s turnaround.

The strong results led to a positive market reaction. Movida’s shares experienced a substantial rally.

Benchmarking Against Competitors

When comparing Movida’s performance to its competitors in the car rental industry, several key metrics stand out:

• Revenue Growth: Movida’s 38.6% revenue growth is impressive compared to industry averages. This indicates effective strategies in fleet management and pricing.
• Profitability: The reversal from a loss to a net profit of R$ 42.5 million ($7.46 million) demonstrates the company’s resilience and operational efficiency.
• EBITDA Margin: An EBITDA margin of 69.9% positions Movida favorably against peers. This showcases strong cost control and revenue management.

Overall, Movida’s second-quarter results have instilled confidence among investors. This led to a notable surge in its stock price.

The company’s ability to improve profitability, manage costs, and grow revenue across various segments has been well-received in the market.

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