Zacks Investment Research upgraded shares of Petroleo Brasileiro S.A. – ADR C (PBR) from UNDERPERFORM to NEUTRAL on March 21, 2013, with a target price of $18.00.
Following Petrobras' decent fourth quarter showing and the recent fuel price hike, we are upgrading the Brazilian state-run energy giant to Neutral from Underperform. The Rio de Janeiro-headquartered company's latest quarterly results benefited from higher financial gains and lower taxes. We are also encouraged by the increase in pump fuel prices that is expected to boost Petrobras' margins. Given its strong pipeline of development projects and impressive exploration successes, Petrobras' long-term outlook seems compelling. However, we remain concerned by the company's declining production trend. The huge investment requirements and the possibility of heightened state interference add to the negative sentiment. Consequently, we expect Petrobras' growth potential to be restrained.
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