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What's in Store for Petrobras (PBR) this Earnings Season?
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Brazilian state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) is expected to release second-quarter 2016 results after the closing bell on Aug 11.
Petrobras reported mixed earnings numbers in the trailing four quarters – two beats and two misses – with an average negative surprise of 203.32%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
The second quarter saw crude advancing more than 26% sequentially − the best quarterly percentage gain in seven years. Throughout the quarter, oil price improved significantly from mid-February, when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, in June, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.
Being the largest integrated energy firm in Brazil and one of the largest in Latin America, Petrobras is benefiting from its upstream business following the improvement on the crude front. In fact, the oil recovery helped energy major like Chevron Corporation (CVX - Free Report) and Marathon Oil Corporation (MRO - Free Report) to post better-than-expected second-quarter earnings.
On the production front, the company hit a record with output of 2.9 million barrels of oil equivalent per day (BOE/D) in June, up almost 2% from the month of May. The previous monthly record of 2.88 million BOE/D was set in Aug 2015.
However, the crude recovery did not favor the company’s refining operations as it raised the input cost. On top of that, high debt levels and a decline in the number of available creditors might put pressure on the company’s financials.
Earnings Whispers
Our proven model does not conclusively show that Petrobras is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% for Petrobras. This is because both the Most Accurate estimate and Zacks Consensus Estimate are pegged at 14 cents.
Zacks Rank: Petrobras has a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
We caution investors against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here is one company from the energy sector which, according to our model, has the right combination of elements to post an earnings beat this quarter.
Key Energy Services Inc. (KEGX - Free Report) with an Earnings ESP of +16.67% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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What's in Store for Petrobras (PBR) this Earnings Season?
Brazilian state-run energy giant Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) is expected to release second-quarter 2016 results after the closing bell on Aug 11.
Petrobras reported mixed earnings numbers in the trailing four quarters – two beats and two misses – with an average negative surprise of 203.32%. Let’s see how things are shaping up for this announcement.
Factors Likely to Influence this Quarter
The second quarter saw crude advancing more than 26% sequentially − the best quarterly percentage gain in seven years. Throughout the quarter, oil price improved significantly from mid-February, when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, in June, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.
Being the largest integrated energy firm in Brazil and one of the largest in Latin America, Petrobras is benefiting from its upstream business following the improvement on the crude front. In fact, the oil recovery helped energy major like Chevron Corporation (CVX - Free Report) and Marathon Oil Corporation (MRO - Free Report) to post better-than-expected second-quarter earnings.
On the production front, the company hit a record with output of 2.9 million barrels of oil equivalent per day (BOE/D) in June, up almost 2% from the month of May. The previous monthly record of 2.88 million BOE/D was set in Aug 2015.
However, the crude recovery did not favor the company’s refining operations as it raised the input cost. On top of that, high debt levels and a decline in the number of available creditors might put pressure on the company’s financials.
Earnings Whispers
Our proven model does not conclusively show that Petrobras is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% for Petrobras. This is because both the Most Accurate estimate and Zacks Consensus Estimate are pegged at 14 cents.
Zacks Rank: Petrobras has a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
We caution investors against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
PETROBRAS-ADR C Price and EPS Surprise
PETROBRAS-ADR C Price and EPS Surprise | PETROBRAS-ADR C Quote
Stocks to Consider
Here is one company from the energy sector which, according to our model, has the right combination of elements to post an earnings beat this quarter.
Key Energy Services Inc. (KEGX - Free Report) with an Earnings ESP of +16.67% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>