NEW YORK (TheStreet) -- Shares of Petrobras (PBR) plunged 8.31% to $6.29 in morning trading Wednesday after Moody's downgraded the Brazilian state-owned energy company's long-term debt rating to Ba2, or junk status, from Baa3.
The firm also assigned a Ba2 Corporate Family Rating (CFR) to the company and lowered the company's Baseline Credit Assessment (BCA) to b2 from ba2.
"These rating actions reflect increasing concern about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements, as well as Moody's expectation that the company will be challenged to make meaningful reduction in its very high debt burden over the next several years," the firm wrote in a research note.
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Moody's also expressed its view that Petrobras is "likely to take longer than previously expected to achieve planned leverage reductions that are needed for a material improvement in its financial profile."
The firm stated it could upgrade Petrobras' rating again "if the company is able to conclusively address its near term liquidity risks," but likely not to investment grade because the company "is expected to face continuing stresses related to the corruption investigating and its very high debt burden."
Separately, TheStreet Ratings team rates PETROBRAS-PETROLEO BRASILIER as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PETROBRAS-PETROLEO BRASILIER (PBR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 20.1%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- PBR's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.30 is sturdy.
- Net operating cash flow has decreased to $6,413.00 million or 18.05% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PETROBRAS-PETROLEO BRASILIER has marginally lower results.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PETROBRAS-PETROLEO BRASILIER's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: PBR Ratings Report