Why Petrobras Shares Keep Falling

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Pity Petrobras (NYSE: PBR) (NYSE: PBR.A) investors — it seems they can't catch a break. Shares of the Brazilian oil giant – officially known as Petroleo Brasileiro – have fallen steadily in the four days leading up to and following the company's poor first-quarter 2024 earnings report. This now includes a decline of 7.2% through 10:45 a.m. ET today.

You can blame this latest decline on Brazil's president himself.

Petrobras' first quarter results

Petrobras only had bad news to report on Monday. First quarter sales fell 15% to $23.5 billion – a poor performance considering that world oil prices in the first quarter of 2024 were similar to those in the first quarter of 2023. Making matters worse, the Petrobras profits fell twice as much, about 38% year over year, to $4.7 billion. .

Unsurprisingly, given the declines, but nonetheless frustrating for investors, Reuters reported on Monday that Petrobras will pay out just $2.6 billion in dividends this quarter, well below the $3 billion payout. Citi Group analysts predicted.

Lula drops the other shoe

And today the other shoe dropped.

According to Reuters, the Brazilian government, which owns almost 29% of Petrobras shares, reports S&P global market information dates, will replace the company's current CEO with a former government official who has “views closer to those of” Luiz Inacio Lula da Silva, the leader of Brazil's President and Workers' Party.

Admittedly, Petrobras' dismal financial results on Monday gave Lula the perfect pretext to make the move. Nevertheless, institutional investors are baffled by the prospect of a socialist taking over Brazil's leading oil company. They underline Lula's public calls for Petrobras to hire more workers, cut dividends and lower prices for the fuel it produces, as everything is aimed at worsening the company's profits and cutting profits for investors in the process .

What should an investor do then? With a valuation of less than five times earnings and an annual dividend of more than 12% today, Petrobras stock may sound like a deep, no-brainer investment. However, just because the stock looks cheap doesn't mean it can't fall further under poorer management.

Petrobras stock is likely a sellout.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.

Why Petrobras Shares Keep Falling was originally published by The Motley Fool

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