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Petroleo Brasileiro is a Brazilian state-owned petroleum corporation established in 1953 that is involved in activities such as crude oil and natural gas exploration, production and distribution. Furthermore, the firm is involved also in transportation, logistics, marketing and export-import services and has its financial arm that is dealing with corporate financial management and administrative operations.
The company claims that it has technologies in place that enables ultra-deep water oil explorations. It has the entire production chain from exploration to transportation to production and distribution. The company has facilities to cover every stage of the manufacturing and production processes. Therefore, it is not surprising that the firm employs more than 45 000 people and produces about 1.8 million barrels of oil on a daily basis. Its mission is to provide energy at the same time ensuring prosperity in an ethical manner while keeping safety and competitiveness at front of its activities.
PBR’s initial public offering (IPO) took place in mid-2000 with an initial trading price of around USD 8 per share on the New York Stock Exchange (NYSE). Currently, the stock price is trading around USD 11 per share making the market capitalization (market cap) reach more than USD 68 billion. Therefore, the stock falls under the large-cap category.
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PBR Stock Forecast 2023
The company had a strong earnings report for the past quarter given the positive surprise of about 38% driving the price higher end of July – beginning of August period. The company also pays dividends quarterly which causes further volatility in the stock price. The usual pattern noticed is that before the dividend payment the stock price adjusts itself to account for additional income that investors receive.
For the past several quarters the company keeps meeting or exceeding the anticipated revenue and profit numbers with positive surprise, which could partially be driven by the global energy crisis and higher prices for petroleum and other energy sources due to the Russia-Ukraine war.
While we have the geopolitical tension in place the company will see some positive impact on its bottom line since western countries – Europe in particular, start looking for alternative sources or other producers to move away from their dependency on Russian oil. This combined with higher oil and gas prices globally is very well visible in the revenue and profitability numbers of PBR where we see increases every quarter starting from the first quarter of 2023.
This additional revenue and earnings should keep supporting the increase of the stock price of the firm in the future. However, this will be highly dependent on the geopolitical and macroeconomic situations that might cause a quick reversal of the revenue numbers and thus affect the stock price growth. Some of the western countries started to support the economy by raising interest rates to fight inflation as well as to provide support to households and businesses by capping energy and fuel prices to help the economy and people overcome difficult times.
We might expect short-term stock price growth, but the new policies and rules combined with expected changes in the geopolitical situation might cause the stock price as well as the revenue and profit numbers to revert to previous levels.
Thanks to increasing revenues and profits the profitability ratios such as return on assets (ROA) and return on equity (ROE) of the company have been upward-slopping for the past several quarters.
In terms of the liquidity ratios, there was some reduction of the firm’s liquidity since the quick ratio of the company dropped to below 1 for the 3rd quarter of 2023. While the current ratio dropped as well it is still above 1 which indicates that the company is still in a healthy shape of meeting its short-term liabilities with current assets, although the situation has been worsening for the recent quarter.
The leverage ratios of the company which indicate the amount of debt financing the company uses is around 31% of the total assets for Q3 which indicate healthy levels of debt financing.
Overall the fundamentals are strong enough to support the price increase in the future assuming the company keeps the levels as they are without any material changes to its financial health.
The technical indicators point to the price being slightly undervalued at its current level of around USD 11. The relative strength index is slightly below the mid area while Bollinger Bands also point out the price to be slightly below its moving average.
On the other side, the moving average convergence divergence (MACD) indicator presents the fact that we are still in the bullish market for the stock with still some positive price move expectations in the near term.
Analysts covering the stock expect the price to be at least USD 8 per share in the next 1-year horizon with an average of around USD 14 per share and a maximum to be USD 16.5 per share.
PBR Stock 2022
As discussed previously in 2022 we saw some volatility in the stock price. Some of those price drops visible on the historical chart are close to the date of the company dividend payments which the market is adjusting to. Examples are the 22nd of November, 12th of August and 24th of May to name a few.
The company is operating in an industry that is heavily dependent on macroeconomic, geopolitical and other factors which are also visible in the price moves compared to the headlines. For example, in early October 2022, the stock price increase was largely driven by the political news around the current president having stronger than expected support in the first round of the elections.
Another news that this time affected negatively the stock price was the information from the company in around mid-August about cutting the price for the refinery gate diesel which the market probably accepted as a negative impact on the company’s revenue thus causing the stock price decrease. Similar news affected the price drop over the June-July period as headlines were pointing out the company cutting the prices of its products.
PBR Stock 2021
Overall in 2021, the stock performance was close to 0% but it was quite volatile again over the year. The first large drop in the stock price happened in late February as the price decreased by more than -20%. The headline was that the president of Brazil changed the pricing policy of the products and replaced the CEO of the firm who was a “financial market-friendly person” (based on the President’s opinion), with a new CEO who was a retired army general.
The stock price remained at low levels until early June when there was an announcement about Petroleo Brasileiro buying USD 2.5 billion in global notes maturing between the 2025-2050 period.
For the rest of the year, the stock was volatile but it managed to close 2021 around the same area where it started the year.
PBR Stock 2020
Early 2020 probably needs no explanation as the global stock market saw a significant drop in value due to the COVID pandemic, and the Brazilian stocks were not an exception since the pandemic affected PBR’s stock price as well.
Other than that the stock price was relatively stable to upward sloping and managed to recover half of the earlier losses by closing the year with -31% performance.
Conclusion
Petroleo Brasileiro is a large-cap company operating in the petroleum industry in Brazil as well as having its impact overseas given the import-export business line. The company has strong financials and benefitted from the global economic and geopolitical turmoil that caused disruptions in the energy and oil sectors. The imported oil and gas from Russia to the western countries was one of the reasons why those governments started to look for alternative sources and suppliers. Thus it caused other petroleum companies and countries to benefit from the current situation and one of those was PBR.
Overall the fundamentals and technical indicators point to stronger stock performance for the future, but this will be highly dependent on geopolitical developments and whether Russia would be able to come back as a supply of oil and gas to western nations. At the same time, policies and regulations that are capping the prices of energy would be another aspect that will have some impact on the stock performance.
The company also pays dividends which is causing additional volatility in the stock price since the price adjusts itself to account for the dividend.
Analysts covering the stock expect the 1-year price to be at least USD 8 per share while the maximum is around USD 16.5 with an average of around USD 14 per share accounting for all opinions.
FAQ
Does PBR’s dividend payment make it an attractive investment?
It depends on what you are looking for – if you are an income investor then you can consider adding the stock to your portfolio to benefit from dividend payments. However, if your goal is capital appreciation, then dividends will not support you since in practice usually, the stock price adjusts itself for the dividend.
Why does the company benefit from the geopolitical turmoil?
Most of the western countries especially in Europe were dependent on the Russian oil and gas supply. Given the fact that since the start of the war the supply was impacted heavily, those countries started to look for alternative ways to fulfil the lacking resources for their households by finding new suppliers.
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