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Is the glass half full or empty in Latin America?

By: Emerging Money
Posted: 7/26/2013 7:25:00 AM
Referenced Stocks:

Is Latin America on the mend?  Earning season can be a tough time trading for anyone looking at short term position but for emerging market investors it can be time to gain insight to emerging market economies.

latinamerica One such earning report shedding light onto Latin America ( GML , quote ) is Mexican telecommunications company America Movil SAB ( AMX , quote ).  When AMX reported yesterday it revenue increase (1.6%) was greatly helped by an improving economy in Latin America beating expectations.

AMX reported a net profit of 14.2 billion pesos or roughly $1.1 billion USD in the second quarter this year or $0.31 per share for ADR traded on U.S. exchanges.  A 7.9% increase quarter over quarter with EBITDA of 2.1%.

In AMX earnings release - AMX also highlighted that U.S. economy appears to be approving along with the pickup in Latin America.  It goes on to pointing out markets are concerned over a reduction in U.S. bond purchases by the U.S. Federal Reserve caused weaker currencies in Latin America helped its service revenue to climb by 7.8%.

AMX provides us a broad look into consumers in 18 countries across the Americas.  Were it increased its subscriber base by 1.6 million.  It also reported where it had a reduction of 867K in wireless subscribers by disconnecting inactive consumers. The reduction was primarily in Peru and Ecuador indicating a deeper look into these economies before jumping into these emerging markets.

Although AMX earnings seem to improving on the surface we AMX's debt to total capital ratio being calculated at 61.97%.  The debit ratio seems high but is inline with the wireless telecommunication services sector's norm. A Quick ratio comes in at 0.67 which means there are not enough liquid assets to satisfy current debt levels if operating earnings were to fall off.

Bottom Line: AMX is not a name I'm looking to jump into but find its increase revenue in Latin America an area to dig deeper into over the weekend.