Ultrapar Beats by $0.18 as EPS Hits $0.46 for the Quarter

Ultrapar Participações (NYSE: UGP) reported quarterly earnings per share of $0.46 on Wednesday, beating the analyst consensus of $0.28 by $0.18, according to FiscalAI. The Brazilian oil and gas company paired the surprise with a net margin of 2.28% and a return on equity of 18.84%. A 64% earnings beat is, by any desk's arithmetic, a considerable miss by the consensus.

The market's applause was measured. UGP shares rose $0.04, or 0.8%, to $5.43 in mid-day trading on Wednesday, on volume of 4,225,256 shares against an average of 3,329,157. The reaction suggests investors treated the beat as an outlier rather than a trend. They may yet be right.

What do the balance-sheet numbers say?

The company disclosed a current ratio (a measure of short-term liquidity) of 1.64 and a quick ratio, which strips out inventory, of 1.26. Its debt-to-equity ratio stands at 0.74. Leverage is present but not alarming.

The valuation and trading picture:

• 50-day moving average: $7.14; 200-day moving average: $5.95
• 52-week range: $3.60 to $8.28
• Market capitalization: $6.06 billion
• Price-to-earnings ratio: 8.91; PEG ratio (P/E adjusted for growth): 0.29
• Beta (sensitivity to market moves): 0.85

The stock trades roughly 24% below its own 50-day average, which tells its own story about recent sentiment.

How generous is the dividend?

The firm paid a dividend of $0.1932 per share on Monday, September 14th, to investors of record on Wednesday, August 26th, which was also the ex-dividend date. The report cites a yield of 599.0%, a figure so far outside normal parameters that it likely reflects an annualization error in the underlying data; readers should treat it with caution. The dividend payout ratio (the share of earnings paid out) is a more plausible 50.82%.

What are analysts doing about it?

The rating record reads like a committee that cannot agree on the question. Five moves deserve note:

• Weiss Ratings trimmed its rating from "buy (b)" to "buy (b-)" on Thursday, October 8th
• Scotiabank downgraded from "sector outperform" to "hold" on Thursday, September 17th
• Zacks Research upgraded from "hold" to "strong-buy" on Thursday, October 15th
• Goldman Sachs cut its price target from $6.50 to $5.80 with a "neutral" rating on Wednesday, August 26th
• JPMorgan Chase & Co. reduced its rating from "overweight" to "neutral" on Thursday, October 22nd

The aggregate verdict, per MarketBeat: one Strong Buy, three Buy and five Hold ratings, an average rating of "Moderate Buy" and a consensus price target of $6.54 — some 20% above the current price, should anyone still trust consensus after this quarter.

Are insiders buying or selling?

Selling, on balance. Insider Pedro Guedes Rabelo sold 30,000 shares on Thursday, September 10th at an average of $7.58, totaling $227,400.00, leaving him with 57,898 shares worth $438,866.84 — a 34.13% reduction in his position, per the SEC filing. CEO Decio De Sampaio Amaral sold 8,000 shares on Tuesday, September 1st at $6.93, for $55,440.00, retaining 151,432 shares valued at approximately $1,049,423.76, a 5.02% decrease in his ownership.

Over the last 90 days, insiders have sold 77,785 shares worth $587,312. Corporate insiders currently own 1.80% of the stock. Executives selling into a beat is a familiar pattern; it is rarely a bullish one.

Who is Ultrapar, in brief?

Ultrapar Participações S.A. is a Brazilian holding company focused on fuel distribution, liquefied petroleum gas (LPG) and bulk liquid storage. Its main businesses are Ipiranga, which distributes and markets fuels; Ultragaz, an LPG supplier for residential, commercial and industrial use; and Ultracargo, which provides storage and handling for bulk liquids including fuels and chemicals.

The verdict: a strong quarter, a modest share-price shrug, downgrades piling up and insiders heading for the exits. The numbers beat. The conviction did not.