Opinions David Burrows
Petroleo Bras Sa PetroPBRDON'T BUYSep 18, 2012
Stock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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Premium contentOur PAST TOP PICK with PBR has triggered its stop at $13.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 3%, when combined with our previous guidance.
Premium contentPremium contentWe reiterate PBR, Brazil's national energy producer as a TOP PICK. Quarterly cash flows reveal that the company is once again building reserves, while continuing to pay down debt. It trades at 5x earnings, 1.2x book and supports a 22% ROE. The dividend yield is supported by a payout ratio of 55% of cash flows. We continue to recommend a stop at $12, looking to achieve $17 -- upside potential of 23%. Yield 7.4%
(Analysts’ price target is $16.96)Premium contentPetrobras (PBR) is the national energy company of Brazil. The company released its strategic plan to 2050 and it emphasizes a renewed growth in capital projects along with a large distribution to share holders ($55 bn by 2029). It trades at 6x earnings, 1.2x book and supports a 29% ROE. We like that cash reserves are growing. The healthy dividend is backed by a payout ratio under 60% of cash flow. We recommend setting a stop-loss at $12, looking to achieve $18 -- upside potential over 25%. Yield 6.5%
(Analysts’ price target is $18.24)
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The prospects that they have for production growth offshore are tremendous. The problem is that the Brazilian government has used their stake in this as a lever. Any time a government has a major stake in a company in certain countries, it can have an impact on their ability to make a profit.