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Petrobras ADRs plummet with change of CEO; Jefferies downgrades stock

Published 2024/05/15, 22:40
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Investing.com – American Depositary Receipts (ADRs) of the state-owned oil company Petroleo Brasileiro SA PN (BVMF:PETR4) plummeted in the American on Wednesday, the 15th, following the announcement of a change in the company's leadership. The market reacted negatively, and the shares closed down 6.7%. Jefferies decided to downgrade the stock from buy to neutral after the announcement, with a price target cut from (NYSE:PBR) $21.2 to $17.7, and from $19.3 to $16.8 for the preferred shares (NYSE:PBRa). In a report released to clients and the market, Jefferies pointed out that the change raises questions.

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"The Brazilian government's decision to replace PBR's CEO Prates with former energy regulator Magda Chambriard appears to be an escalation of the push to intervene in the company. We believe this is likely to raise questions among investors over PBR's governance, and keep the valuation discount wide near term."

Analysts state that, although the change is a prerogative of the government, it " inherently raises questions about the implementation of PBR’s strategic plan, ability to achieve fuel price import parity, sustain dividends and governance," add Alejandro Anibal Demichelis, Pedro Baptista, and Alessandro Conti.

The experts recall that the change in leadership comes after a standoff over the state-owned company's extraordinary dividends. At the time, Prates advocated for the distribution of half of the withheld amounts - as subsequently occurred - but faced widespread resistance from the government, mainly from the Ministry of Mines and Energy (MME).

"Although the appeal of PBR’s pre-salt asset base & production growth remains, our conviction that the firm will be able to maintain capital discipline and deliver differentiated shareholder returns has been reduced," lament the analysts.

Petrobras on InvestingPro

Petrobras shares are traded at a low earnings multiple, according to InvestingPro, the premium platform of Investing.com. The company pays good dividends to shareholders and provided a high return in the last year, according to Protips, artificial intelligence (AI) insights based on fundamental indicators. To access details of Petrobras Protips, as well as other companies in the oil and gas sector in Brazil and worldwide, subscribe to InvestingPro with a discount of up to almost 50%, using the code INVESTIR.

Petrobras' financial health has an overall score of 3.48, considered a B grade, or "excellent performance," according to InvestingPro.

The fair price of preferred shares is estimated at R$60.50, with a potential upside of 48%, according to 13 investment models, with a medium level of uncertainty. The models range from R$38.76 to R$79.20. The target of ten analysts is more pessimistic, at R$42.53. Analysts estimate a target price of R$34 to R$47.

For ADRs (in dollars), the platform's projected fair price is $24.96, with a potential upside of 49%, with a medium level of uncertainty. The 14 models predict $15.60 to $32.90. The target of 14 analysts is more pessimistic, at $17.40, with estimates ranging from $13 to $21.

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