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Analysts Don’t Have Much Love for Petrobras Stock

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Sep. 5 2018, Updated 10:30 a.m. ET

PBR ranks last

In this article, we’ll examine analysts’ ratings for Petrobras (PBR), which occupies the final spot on the list of the top seven integrated energy companies. The other stocks near the bottom include BP (BP) and ExxonMobil (XOM) with “buy” ratings from 40% and 30% of analysts, respectively. Now let’s look at PBR.

PBR’s market cap of ~$64 billion ranks it last among the seven companies under review.

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Analysts’ ratings for Petrobras

The graph above shows that only two analysts of the 14 covering PBR have rated the stock as a “buy” as of August 31. Another 12 analysts (or 86%) have rated PBR as a “hold.”

In the past year, Petrobras’s mean target price has risen 27% to $14 per share. PBR’s mean price target implies a 32% rise from its current level. Its implied gain has increased in the stated period, as its mean target price has risen 27% compared to the rise of 19% in its stock price in the past year.

Why analysts have a high number of “hold” ratings on PBR

Analysts’ number of “buy” ratings on Petrobras has fallen steeply in 2018. Comparatively, in December 2017, PBR had 46% “buy” ratings, perhaps due to a sharp surge in its stock price in the year. In fact, until May, Petrobras stock was up 60%. Since May, though, it’s lost most of its gains.

PBR recently posted its second-quarter earnings, which exceeded analysts’ estimates. In the first half, PBR’s operating earnings rose 18% year-over-year. Its latest net debt stood at $74 billion compared to $100 billion in 2015, showing a fall. However, PBR’s total debt-to-total capital ratio remained higher than those of most integrated energy companies worldwide. The company has a long way to go to reach a comfortable debt position.

PBR’s increased stock price and high debt have presumably led most analysts to give the stock “hold” ratings.

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