Petroleo Brasileiro S.A., or Petrobras PBR, is slated to release fourth-quarter 2024 results on Feb. 26. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) and revenues is pegged at 53 cents and $21.1 billion, respectively. 

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The earnings estimates for the to-be-reported quarter have been revised downward by 35.4% over the past 30 days. The bottom-line projection indicates a decline of 58.3% from the year-ago reported number. The Zacks Consensus Estimate for quarterly revenues, meanwhile, suggests a year-over-year decrease of 22.1%.

For full-year 2024, the Zacks Consensus Estimate for Petrobras’ revenues is pegged at $91.6 billion, implying a drop of 10.5% year over year. The consensus mark for 2024 EPS is pegged at $2.14, indicating a contraction of around 48.8%.

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In the trailing four quarters, the Rio de Janeiro-based Brazil's state-run energy giant surpassed EPS estimates twice, met once and missed in the other, as reflected in the chart below.

About Petrobras

Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company’s activities include: exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Petrobras this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. 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.

Petrobras has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

What’s Shaping Q4 Results?

Petrobras is expected to have reaped the reward of strong production. In 2024, Petrobras successfully met its oil and gas production goals, as outlined in its 2024-2028 plan, with a production variance of only ±4%. The company achieved a total production of 2.7 million barrels of oil equivalent per day (boed), with commercial production reaching 2.4 million boed and oil production standing at 2.2 million barrels per day (bpd).

A key milestone achieved by Petrobras was its record-breaking production in the pre-salt region, where total owned and operated production reached 2.2 million boed and 3.2 million boed, respectively. The pre-salt production volume accounted for about 81% of the company’s overall production.

For the year ended 2024, Petrobras also marked significant developments in infrastructure, including the launch of two major Floating Production Storage and Offloading (FPSO) platforms ahead of schedule. The FPSO Maria Quitéria began operations in the Jubarte field of the Campos Basin, originally scheduled to start in 2025, while FPSO Marechal Duque de Caxias commenced production in the Mero field of the Santos Basin. Additionally, the FPSO Sepetiba platform reached maximum oil production capacity within eight months.

The extraordinary performance of these FPSO platforms helped offset production losses due to maintenance stoppages, decline of mature fields, unforeseen shutdowns imposed by regulatory authorities and the effects of the Ibama strike.

On a somewhat bearish note, the increase in Petrobras’ costs might have dented its to-be-reported bottom line. PBR’s pre-salt lifting costs in the third quarter increased around 8.7% year over year to $6.10 per barrel. The upward cost trajectory is likely to have continued in the fourth quarter due to outlays associated with underwater inspections.

Price Performance & Valuation

PBR stock climbed 16% year to date, outperforming the energy sector's 6% gain.

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From a valuation standpoint, Petrobras trades at a notable discount compared to Western oil majors. The stock's forward price-to-earnings (P/E) ratio of 4.81 is far lower than ExxonMobil XOM and Shell SHEL, which trade above or slightly below 10X earnings. This undervaluation reflects concerns over political risks and government influence but could present a buying opportunity for investors seeking exposure to high free cash flow and strong reserve growth.

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Assessing Petrobras’ Prospects: Hold the Stock

Petrobras presents both opportunities and challenges, making it a stock that warrants a neutral stance. On the positive side, the company benefits from strong production growth, a competitive cost structure, and an appealing valuation. The ongoing expansion at Búzios, coupled with solid cash flow generation, supports its long-term outlook. Additionally, its high dividend yield offers a cushion against downside risks.

However, persistent political risks, regulatory uncertainties and government intervention create headwinds that investors cannot ignore. Oil price fluctuations and currency volatility further complicate the near-term outlook. While Petrobras’ fundamentals remain strong, these external factors could limit immediate upside potential. Given this mix of strengths and risks, investors should monitor key developments in oil markets, regulatory policies, and macroeconomic conditions before making decisive moves on PBR stock.

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