Fundamental outlook
Natura’s Q2 results underscore the upside of the “Wave 2” integration with Avon – the two brands now operate under a unified, more efficient supply‑chain and working‑capital regime. The firm’s net income of BRL 445 m and strong cash generation signal that the broader Brazilian consumer‑goods sector is benefitting from consolidation, tighter cost control and the added scale of a multinational portfolio. For the region, the successful rollout of the integration model provides a template for other fragmented players (e.g., cosmetics, personal‑care, and mid‑market retail) to pursue cross‑border synergies, which should lift earnings growth expectations across Brazil, Chile, Colombia and Mexico.
Technical and market‑wide implications
On the price chart, the IBOVESPA has already broken above the 200‑day SMA and is testing the 2,300 pts resistance, while Brazil‑focused ETFs (e.g., BRL‑30) are holding the 20‑day EMA. The positive earnings momentum from Natura, combined with the “integration‑boost” narrative, is feeding a risk‑on bias for Brazil‑denominated equities and the broader LATAM basket. In parallel, the S&P Latin America index is finding support near the 1,050 pts level, with the sector‑weighting to consumer‑discretionary and financials showing bullish divergence on the MACD.
Actionable trading ideas
- Long Brazil‑ex‑US equities or a broad LATAM ETF (e.g., iShares MSCI Brazil Capped (EWZ), iShares Latin America 40 (ILF) on a breakout above the 2,300 pts IBOVESPA level. Target the next resistance at 2,400 pts; a 5‑6 % upside is realistic given the integration‑driven earnings tailwinds.
- Consider a short‑term “integration‑play” spread: go long Natura (NATU3) on a pull‑back to the BRL 30‑day SMA and hedge with a short position in a less‑integrated peer (e.g., Cia. de Bebidas (Ambev)) to capture the relative outperformance of the integrated model.
- Maintain a defensive stop around 1.5 % below the entry for the Brazil‑wide long, and tighten the stop on any reversal of the 200‑day SMA or a breach of the 20‑day EMA on the LATAM index, as those would signal a shift back to capital‑flight risk.
Overall, the successful Natura‑Avon integration is a catalyst that should keep earnings growth and cash‑flow expectations elevated for Brazil and its neighboring markets, supporting a bullish medium‑term bias for LATAM equities while offering clear entry points on both fundamental and technical grounds.