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Emerging Market Energy Company Flashes Strong Buy Signal
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“Those who do not study the past will repeat its errors. Those who study it will find other ways to err.” – Bob Farrell
Given the current volatility in U.S. markets, individual stocks can decline more than 10% on any given day. In this choppy, downward-trending environment, profiting from the long side on domestic stocks is very difficult. In contrast to the severe bear markets experienced by the major U.S. indexes, emerging markets have presented opportunities that are performing much better as we head deeper into the final quarter of the year.
After over a decade of underperforming, many emerging markets have finally started to display relative strength versus U.S. equities. A historic bull run that culminated in the COVID-19 melt-up (exacerbated by overly accommodative fiscal and monetary policies) left domestic stocks unwanted and overvalued. And while 2022 hasn’t been kind to most U.S.-based companies, it’s a completely different story when it comes to emerging markets.
Many emerging markets were undervalued prior to the beginning of this year. As such, they’ve weathered the global slowdown relatively well, and their stocks haven’t been hit nearly as hard. In fact, in some cases, individual stocks in these markets have flourished.
The iShares MSCI Brazil ETF (EWZ - Free Report) is an example of an emerging market ETF that has outperformed this year. EWZ seeks to track the investment results of an index composed of Brazilian equities. The iShares MSCI Brazil ETF has risen nearly 20% this year, all while the major U.S. markets continue to hover in a deep bear market. EWZ contains a diverse set of companies spanning many different sectors.
We’re going to explore one company within the EWZ ETF that is standing out above the rest. This company represents over 7% of the total EWZ holdings. It’s also part of the Zacks Oil and Gas – Integrated – Emerging Markets industry group, which currently ranks in the top 36% out of more than 250 industry groups. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.
Digging a bit deeper, the industry has returned north of 46% this year versus a more than 23% loss for the general market:
Image Source: Zacks Investment Research
In addition, the group is displaying favorable characteristics as we can see below:
Image Source: Zacks Investment Research
Let’s take a closer look at one individual stock within this group that is flashing signs of outperformance.
Petróleo Brasileiro explores for, produces, and sells oil and gas globally. PBR is engaged in the prospecting, drilling, refining, processing and transporting of crude oil and natural gas. One of Brazil’s energy giants, PBR was incorporated in 1953 and is based in Rio de Janeiro, Brazil.
PBR has exceeded earnings estimates in each of the past two quarters. The oil and gas company most recently posted Q2 EPS back in July of $1.39/share, a 21.93% surprise over the $1.14/share consensus estimate. Furthermore, the company pays an enviable $3.60 (25.3%) dividend and has a market capitalization of nearly $93 billion.
The stock has performed admirably this year, with PBR shares advancing more than 83%. The upward-trending pattern is showing no signs of a reversal at this point, and it’s likely that higher highs are in store.
Image Source: StockCharts
Analysts are expecting full-year EPS estimates to rise 128.15% this year to $5.43/share. Revenues are projected to increase 45.73% to $122.37 billion. PBR stock boasts a highest possible ‘A’ rating in each of our Zacks Growth, Value, and Momentum Style Score categories. It’s not difficult to see why this stock is a compelling investment, particularly in this difficult market environment.
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Emerging Market Energy Company Flashes Strong Buy Signal
“Those who do not study the past will repeat its errors. Those who study it will find other ways to err.” – Bob Farrell
Given the current volatility in U.S. markets, individual stocks can decline more than 10% on any given day. In this choppy, downward-trending environment, profiting from the long side on domestic stocks is very difficult. In contrast to the severe bear markets experienced by the major U.S. indexes, emerging markets have presented opportunities that are performing much better as we head deeper into the final quarter of the year.
After over a decade of underperforming, many emerging markets have finally started to display relative strength versus U.S. equities. A historic bull run that culminated in the COVID-19 melt-up (exacerbated by overly accommodative fiscal and monetary policies) left domestic stocks unwanted and overvalued. And while 2022 hasn’t been kind to most U.S.-based companies, it’s a completely different story when it comes to emerging markets.
Many emerging markets were undervalued prior to the beginning of this year. As such, they’ve weathered the global slowdown relatively well, and their stocks haven’t been hit nearly as hard. In fact, in some cases, individual stocks in these markets have flourished.
The iShares MSCI Brazil ETF (EWZ - Free Report) is an example of an emerging market ETF that has outperformed this year. EWZ seeks to track the investment results of an index composed of Brazilian equities. The iShares MSCI Brazil ETF has risen nearly 20% this year, all while the major U.S. markets continue to hover in a deep bear market. EWZ contains a diverse set of companies spanning many different sectors.
We’re going to explore one company within the EWZ ETF that is standing out above the rest. This company represents over 7% of the total EWZ holdings. It’s also part of the Zacks Oil and Gas – Integrated – Emerging Markets industry group, which currently ranks in the top 36% out of more than 250 industry groups. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.
Digging a bit deeper, the industry has returned north of 46% this year versus a more than 23% loss for the general market:
Image Source: Zacks Investment Research
In addition, the group is displaying favorable characteristics as we can see below:
Image Source: Zacks Investment Research
Let’s take a closer look at one individual stock within this group that is flashing signs of outperformance.
Petróleo Brasileiro S.A. Petrobras (PBR - Free Report)
Petróleo Brasileiro explores for, produces, and sells oil and gas globally. PBR is engaged in the prospecting, drilling, refining, processing and transporting of crude oil and natural gas. One of Brazil’s energy giants, PBR was incorporated in 1953 and is based in Rio de Janeiro, Brazil.
PBR has exceeded earnings estimates in each of the past two quarters. The oil and gas company most recently posted Q2 EPS back in July of $1.39/share, a 21.93% surprise over the $1.14/share consensus estimate. Furthermore, the company pays an enviable $3.60 (25.3%) dividend and has a market capitalization of nearly $93 billion.
The stock has performed admirably this year, with PBR shares advancing more than 83%. The upward-trending pattern is showing no signs of a reversal at this point, and it’s likely that higher highs are in store.
Image Source: StockCharts
Analysts are expecting full-year EPS estimates to rise 128.15% this year to $5.43/share. Revenues are projected to increase 45.73% to $122.37 billion. PBR stock boasts a highest possible ‘A’ rating in each of our Zacks Growth, Value, and Momentum Style Score categories. It’s not difficult to see why this stock is a compelling investment, particularly in this difficult market environment.