Back to top

Image: Bigstock

How Will Petrobras (PBR) Fare in its Upcoming Q2 Earnings?

Read MoreHide Full Article

Petroleo Brasileiro S.A., or Petrobras (PBR - Free Report) is set to release second-quarter results on Jul 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.13 per share on revenues of $31.5 billion.

Let’s delve into the factors that might have influenced Brazil's state-run energy giant’s results in the June quarter. But it’s worth taking a look at PBR’s previous-quarter performance first.

Highlights of Q1 Earnings & Surprise History

In the last-reported quarter, the Rio de Janeiro-headquartered oil company beat the consensus mark on higher oil prices and strong downstream results. PBR had reported earnings per ADS of $1.29, above the Zacks Consensus Estimate of $1.08. However, revenues of $27.2 billion generated by the firm missed the Zacks Consensus Estimate by 2.7% due to lower oil product sales following the divestment of its RLAM refinery.

Petrobras beat the Zacks Consensus Estimate for earnings twice in the last four quarters and missed in the other two, resulting in a negative earnings surprise of 0.68%, on average. This is depicted in the graph below:
 

Petroleo Brasileiro S.A. Petrobras Price and EPS Surprise

Petroleo Brasileiro S.A. Petrobras Price and EPS Surprise

Petroleo Brasileiro S.A. Petrobras price-eps-surprise | Petroleo Brasileiro S.A. Petrobras Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the second-quarter bottom line has remained the same in the past seven days. The estimated figure indicates a 4.2% decline year over year. The Zacks Consensus Estimate for revenues, however, suggests a 50.1% increase from the year-ago period.

Factors to Consider

Petrobras is expected to have benefited from a surge in oil realizations. In the January-to-March period, the average sales price of oil in Brazil surged 63.5% from the year-earlier period to $93.71 per barrel. The uptick is most likely to have continued in the second quarter, with commodity prices remaining strong on the back of geopolitical tensions, strained supply and robust demand. This price boost is likely to have buoyed the revenues and cash flows of the Latin American firm.

On a somewhat bearish note, the increase in Petrobras’ costs might have dented the company’s to-be-reported bottom line. PBR’s pre-salt lifting costs in the first quarter increased around 10.8% year over year to $5.13 per barrel. The upward cost trajectory is likely to have continued in the second quarter due to maintenance interventions.

The company is also expected to have experienced lower production during the quarter. Per PBR’s recently issued update, the company churned out an average of 2,653 thousand barrels of oil equivalent per day in the second quarter, down 5.1% from Q1 and year over year. The fall could be attributed to maintenance stoppages, plus Petrobras’ lower working interests in the Atapu and Sepia fields following production-sharing contracts.

What Does Our Model Say?

The proven Zacks model does not conclusively show that Petrobras is likely to beat estimates in the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: PBR has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.13 per share each.

Zacks Rank: Petrobras currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.

Stocks to Consider

While an earnings beat looks uncertain for PBR, here are some firms from the energy space that you may want to consider on the basis of our model:

Valero Energy Corporation (VLO - Free Report) has an Earnings ESP of +10.22% and a Zacks Rank #1. The firm is scheduled to release earnings on Jul 28.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2022, VLO has a projected earnings growth rate of 644.5%. Valued at around $42.5 billion, Valero Energy has gained around 63.3% in a year.

Imperial Oil Limited (IMO - Free Report) has an Earnings ESP of +2.41% and a Zacks Rank #2. The firm is scheduled to release earnings on Jul 29.

IMO is valued at around $27.5 billion. The Zacks Consensus Estimate for the company’s 2022 earnings has been revised 4.6% upward over the past 60 days. Imperial Oil has surged around 59.3% in a year.

ExxonMobil (XOM - Free Report) has an Earnings ESP of +5.89% and a Zacks Rank #2. The firm is scheduled to release earnings on Jul 29.

XOM topped the Zacks Consensus Estimate by an average of 1.3% in the trailing four quarters, though it experienced an 8% miss in Q1. ExxonMobil has gained some 52.6% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.