Why Petrobras Braseileiro (PBR) Stock Is Down Today

NEW YORK (TheStreet) -- Petrobras Braseileiro (PBR) was falling -0.4% to $14.55 Monday on news that the company cut its workforce by 12.4% through a voluntary separation program.

The program, launched in January, offers an early retirement plan to employs. Petrobras said 8,298 employees agreed to be bought out, and 55% of them will leave the company in 2014.

Petrobras expects the program to save the company 13 billion Brazilian reais, about $5.85 billion, from 2014 to 2018. The company will write off 2.4 billion reais in the first quarter as a result of the program.

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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 attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • PBR's debt-to-equity ratio of 0.76 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 0.98 is weak.
  • Net operating cash flow has decreased to $4,734.00 million or 16.58% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 26.6% when compared to the same quarter one year ago, falling from $3,763.00 million to $2,760.00 million.
  • You can view the full analysis from the report here: PBR Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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