IBD stock of the day; PBR Stock Eyes New Buy Point on Strong Petrobas Earnings and Huge Dividend







Analysis of MICI stocks

  • Close to 14.98 base cup buy point, but may soon get a handful
  • Profits soared 1,273% in 2021, with strong growth this year
  • Dividend yield exceeds 44%

composite score

Industry group ranking

Emerging model


* No real-time data. All data displayed was captured at 1:53 p.m. EDT on 08/03/2022.

Brazilian oil giant Petrobras is the IBD stock of the day, with PBR stock working a handle buy point as earnings rise amid high oil prices. The oil stock also offers a juicy, if controversial, dividend.

Petrobras (ACB) produces 1,852,000 barrels of petroleum products per day. It has 5,042 oil and gas wells, 123 owned and chartered vessels and 12 refineries.

Founded in 1953, the company is based in Rio de Janeiro. The main world markets are Brazil (73% of turnover), the United States (6.6%) and China (4.9%).

Rivals include Chevron (CLC), Exxon Mobil (XOM) and Shell (SHEL). They also include Saudi oil.

Many energy stores can be found on the mighty IBD classification and IBD List 50 highest growth values. These include XOM stock and New Fortress Energy (ENF). Several are creating or considering new entries.

But energy stocks oscillate with energy prices. Crude oil prices are far from their June highs, dropping significantly on Wednesday. US natural gas prices are still near long-term highs, with European natural gas prices extremely high.

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PBR Stock Eyes Bottom Handle Entry

Shares of Petrobras were up 1 cent at 13.85 trading today, after falling slightly in the previous two sessions. The PBR stock is well above the 50-day moving average.

After rallying 22.7% last week, PBR stock formed the right side of a cut base with a buy point of 14.98. With this week’s decline, the oil stock is working on a possible handle, which would reduce the buy point to 14.54.

A decent handful, which won’t be valid until Friday’s close. would be a positive technical sign. It would also let the 50-day line for the PBR stock catch up a bit.

PBR stock’s relative strength line soared in the first half of this year, according to MarketSmith chart analysis. It dipped in June but is nearly back near its May peak, albeit below all-time highs. A rising RS line is a sign of outperformance against the S&P 500.

The pattern includes an earnings gap of nearly 7% on July 29. It dates back to the end of May and follows a successful breakout in December.

A relative strength rating of 98 means that Petrobras has outperformed 99% of all stocks in IBD’s database over the past year.

The integrated oil and gas industry group is doing well, ranked No. 31 out of 197 groups tracked by IBD. The PBR stock is the #1 stock out of 22 stocks in this group.

Petrobras profits will jump 74%

Petrobras gets a perfect IBD Composite Rating of 99, the highest of its group. Comp Scoring combines key fundamental and technical metrics into one easy-to-use score.

A 77 EPS Ranking reflects the return of its profits after declines. Petrobras shows zero quarter of earnings acceleration but one quarter of sales acceleration.

On July 28, Petrobras broke earnings estimates for the June quarter.

Additionally, Petrobras generated free cash flow of $12.8 billion, up 61% from the prior quarter. Sales were also up 28% from the first quarter “mainly due to a 12% rise in Brent prices, higher oil and petroleum product sales volumes and higher petroleum product prices. and natural gas,” the company said in its earnings release.

Petrobras linked the sales gain to the recovery in global demand for oil and petroleum products after the Covid-19 pandemic. In addition, the war in Ukraine has had a negative impact on supplies, he added.

In 2021, Petrobras earnings rebounded 1,273% to $3.17 per share. They sank 81% the previous year. The pandemic has crushed energy demand.

Wall Street analysts expect ACB profits to rise 74% for all of 2022, while revenues rise 32%. They expect profits and sales to fall in 2023.

Of 13 Wall Street analysts, seven are evaluating the PBR stock buy and six have a grip. No one has sales, shows FactSet.

Their average target price of $16.76 implies an additional 21% upside for PBR stock following its post-earnings surge. Four analysts raised their price targets on Petrobras after its July 28 earnings overshoot, and one cut.

Alongside Petrobras, Exxon Mobil and Chevron beat second-quarter results on July 29, posting record profits.

Funds pile up in oil stock but challenges persist

Oil stock shows four quarters of increases in fund ownership, according to the IBD Inventory Checker Tool. In June, 479 funds held PBR shares, up 2% from March.

Funds holding Petrobras shares include the highly rated Fidelity Contrafund.

However, the state-controlled PBR is subject to political whims. The Brazilian government, holding a majority stake and facing a tough re-election battle later this year, asked Petrobras in July to raise dividends, Reuters said.

Petrobras will therefore hand out at least twice as much as its biggest international rivals in Q2 dividends, swelling government coffers.

It will also distribute around 60% more to shareholders than its $10.5 billion (54.33 billion reais) profit. Critics claim the huge payout will lead to underinvestment in the business.

Year-to-date, PBR stock has gained 50.6%. It gives 44.5%.


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