Opinions Christine Tan
Petroleo Bras Sa PetroPBRCOMMENTMay 31, 2017
Christine TanStock 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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She is light in oil, because the US shale producers have come back a lot faster in terms of production. That is more than offsetting whatever OPEC is doing on the cutting side. This company is very inexpensive, and has great assets. Management has laid out a plan to divest non-core assets, pay down some debt and right size their balance sheet. If you have a long-term time horizon, this is a good risk/reward. There is some near-term noise around Brazil, which will be a bit of a headwind.