NEW YORK (TheStreet) -- Shares of Petrobras (PBR - Get Report) rose 1.68% to $10.30 in morning trading Monday after the beleaguered Brazilian state-owned energy company reported a surprise first-quarter earnings beat on Friday.
Petrobras posted a 1.2% decline in earnings to 5.33 billion reais, or $1.8 billion, compared to 5.39 billion reais in the same period one year earlier, according to Reuters. This beat the consensus estimate of a quarterly profit of 2.5 billion reais, according to analysts polled by Thomson Reuters.
The 49% plummet in oil prices in the several months nullified the effect of an 11% increase in crude output, but savings stemming from an end to fuel subsidies offset that decline. This helped increase operating results measured by EBITDA to 21.5 billion reais, more than a third higher than the 16 billion reais analysts had expected.
Separately, TheStreet Ratings team rates PETROLEO BRASILEIRO SA- PETR as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PETROLEO BRASILEIRO SA- PETR (PBR) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 452.2% when compared to the same quarter one year ago, falling from $2,760.00 million to -$9,722.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PETROLEO BRASILEIRO SA- PETR's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, PBR's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.31%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 457.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- PETROLEO BRASILEIRO SA- PETR has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PETROLEO BRASILEIRO SA- PETR swung to a loss, reporting -$1.12 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus -$1.12).
- You can view the full analysis from the report here: PBR Ratings Report