Petroleo Brasileiro Petrobras SA (NYSE:PBR) has seen a rise in the ADR prices despite the fact that the Q3 profits went down by as much as 39%. The ADR rose up by 9% still riding on a 3 month rise of around 23% for the largest oil company in Brazil. Petroleo Brasileiro Petrobras SA had recently registered a receding profit margin of $1.56 billion for the third quarter 2013 as compared to $2.74 billion from the same period last year. The net operating revenue for the company has also seen a decline from $33.95 billion from $36.37 billion last year. This decline in revenue is mostly because of the stagnant production and the very large exploration costs which in addition to the already rising demand for fuel domestically have caused imports to rise and the cost for them too has increased. The Brazilian government which ons 47$ of Perrobras has managed to keep domestic oil prices lower than the cost of imports as this can lead to inflation spiking.
This major oil company is working on a new pricing method for gasoline and diesel in order to curb the huge losses on the sale of subsidized oil. These losses have raised many questions on the feasibility of the country running the company. Experts however have said that the ADR target that the company has set of $25 is good enough and the closing price of $15.91 is also within target prices. The experts expect that the market will look post the weak results and will look at a possibly strong performance which could lead to a stronger positioning of the company. The fact that there is a scope for outperformance is a great source of encouragement for the company and it still ranks highly on analysts’ expectations to outperform in the US markets and internationally as well.
