Why TheStreet Ratings Team Says Petrobras (PBR) Stock Is a 'Hold'

NEW YORK (TheStreet) -- TheStreet Ratings team rates Petrobras  (PBR)  as a "hold" with a ratings score of C. The stock was up 4.13% to $17.91 at 1:55 p.m. 

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, solid stock price performance and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

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

  • PBR's revenue growth has slightly outpaced the industry average of 2.4%. 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.
  • Compared to its closing price of one year ago, PBR's share price has jumped by 29.98%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • PETROBRAS-PETROLEO BRASILIER's earnings per share declined by 21.7% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, PETROBRAS-PETROLEO BRASILIER's EPS of $1.70 remained unchanged from the prior years' EPS of $1.70. This year, the market expects an improvement in earnings ($3.74 versus $1.70).
  • The gross profit margin for PETROBRAS-PETROLEO BRASILIER is currently lower than what is desirable, coming in at 32.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.02% trails that of the industry average.
  • Net operating cash flow has decreased to $6,413.00 million or 18.05% 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.
  • 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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