With 43% ‘Buy’ Ratings, Petrobras Is Second to Last



Analysts’ ratings for Petrobras

In the previous article, we reviewed analysts’ ratings for BP (BP). Now let’s look at analysts’ ratings for Petrobras (PBR). Petrobras has the second-smallest market cap of ~$84 billion among the seven integrated energy stocks under discussion in this series.

The graph above shows that six (or 43%) out of the 14 analysts covering Petrobras have rated it as a “buy.” The remaining eight analysts (or 57%) have rated PBR as a “hold.” Other leading integrated energy companies Total (TOT), Suncor Energy (SU), and Royal Dutch Shell (RDS.A) have been rated as “buys” by 100%, 92%, and 80% of analysts, respectively.

In the past year, Petrobras’s mean target price has risen 48% to $16.6 per share. Petrobras’s mean target price implies a gain of ~22% from the stock’s current level. Its implied gains have widened due to a steeper rise in its mean target price (48%) than the rise in its stock price (37%).

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Why most analysts call Petrobras a “hold”

Analysts’ ratings for Petrobras have improved in the past year, likely due to its improving financials. In the first nine months of 2018, the company’s adjusted EBITDA rose 19% YoY. Also, Petrobras’s nine-month EPS surpassed Wall Street analysts’ estimate. Further, the company successfully reduced its net debt by 14% over December 31, 2017, to $73 billion in the first nine months of 2018.

However, the majority of Wall Street analysts have rated the stock as a “hold” likely due to its debt position. Though Petrobras’s net debt has reduced, the company’s total debt-to-total capital ratio still stands higher than those of most integrated energy companies worldwide. Thus, Petrobras still has a long way to go to reach a comfortable debt position.


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