Barclays Sees More Upside In Preferred Shares Of Petrobas
Positive 2Q16 results may boost the shares of Petroleo Brasileiro SA Petrobras (ADR) (NYSE: PBR) in the near term, Barclays’ Paul Y. Cheng said in a report. The analyst has an Underweight rating on Petrobras and an Equal-weight rating on the preferred shares. The price target is at $9.
Despite a worsening economic backdrop, Petrobas’ operations were better than expected in 2Q16. The company’s E/ADS came in at US$0.12, in-line with consensus, while the refining segment outperformed, backed by robust exports.
The new capex run-rate was “softguided to the ~US$15 bn range beyond 2016 (we previously assumed US$19 bn in 2017),” and the company achieved some progress in asset sales. With these developments, Petrobras is beginning to address some of investors' primary concerns, Cheng commented.
Preferred Is Preferred
Although the 2Q update is a positive, the company’s shares have moved up in anticipation of operational and restructuring improvements. The common shares have risen 26 percent since 1Q16, while the preferred shares are up 43 percent. This compares with an average 7 percent gain for emerging market major oil peers.
“Between the two classes of shares, we believe the preferred currently offer better value and upside potential. When the dividend is reinstated we think the preferred shares will likely continue to receive a much higher payout than the common shares, at least between 2017-2020,” the analyst wrote.
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Latest Ratings for PBR
|Feb 2017||JP Morgan||Upgrades||Neutral||Overweight|
|Nov 2016||Tudor Pickering||Downgrades||Buy||Hold|
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