In the last 12 months, Petrobras (PETR4) shares rose 81.5%, to R$34.72 each, while Vale (VALE3) fell 2%, to R$71.55. Is it worth investing in these shares?
The recent release of the third quarter balance sheets, with billion-dollar profits and huge dividends in both cases, creates a good opportunity for investors to analyze the biggest companies on the Stock Exchange.
Before diving into the finances of these companies, you need to pay attention to their risk profile. According to experts, the most conservative should avoid actions.
Even the most risky need to build a balanced portfolio before entering the stock market, in addition to ensuring an emergency reserve in a fixed income instrument with daily liquidity.
Petrobras (PETR4 and PETR3)
In the third quarter of 2023, Petrobras made a profit of R$26.63 billion, 42% less than in the same period last year and around R$2 billion below what the market expected.
The lower profitability is the result of the decline in oil prices and derivative margins on the international market, even though the state-owned company’s production has increased by 10%.
On average for the period, a barrel of Brent oil, an international reference, was traded at US$86.76, while in the third quarter of last year, with the recent war in Ukraine, it was at US$100.85. On Friday (10), the price of the commodity was US$81.70.
Although new records in the price of oil are not in sight, analysts do not see it falling anytime soon, especially with the war between Israel and Hamas.
What worries the market most about the oil company is its dividend and investment policy.
The current formula for profit distribution is: if the company’s gross debt is equal to or less than US$65 billion, it must distribute 45% of its free cash flow. In the third quarter, debt increased by 12.4% annually and reached US$61 billion.
For now, the prospects are not for less debt. The Petrobras board is due to meet on November 23rd to define the company’s investment policy between 2024 and 2028.
The expectation is that the state-owned company will increase spending to finance the energy transition, which could lead to a smaller distribution of dividends.
“We don’t judge [matrizes energéticas sustentáveis como] a business as interesting as the exploration and production segment from the point of view of value generation. Therefore, we prefer to remain conservative and wait [a reunião]”, say analysts at Genial Investimentos, in a report.
In the short term, however, the market expectation is for a large profit distribution at the beginning of 2024, referring to 2023.
Last week, Petrobras approved a payment of R$17.5 billion in dividends and JCP (interest on equity) based on the third quarter. The equivalent of R$1.34 per paper for those who have it on November 21st.
For UBS BB, such a level of profit distribution is still very attractive, especially in relation to sector peers, and compensates for what the bank sees as “a deterioration in governance”, with the end of international parity in the company’s pricing policy. company.
According to the institution, what puts the investment in Petro at risk is a possible reduction in shareholder remuneration, a higher investment plan or the purchase of Novonor’s (formerly Odebrecht) stake in Braskem.
For now, UBS BB recommends investing in the stock, seeing the potential for it to reach R$42 in the next 12 months, an appreciation of 21% in relation to the current price.
It is worth remembering that Petrobras was the second largest dividend payer in the world — behind only the mining company BHP — in 2022, distributing US$21.7 billion, more than double that of 2021, when shareholders received US$9.1 billion.
Vale made a profit of R$13.8 billion in the third quarter of 2023, an annual drop of 41%, but above the R$12 billion expected by analysts. However, this is the third consecutive drop in the company’s profits, given the decline in ore prices compared to 2022.
In June 2021, the commodity reached a record price of R$219.77 per ton.
In September of that year, with the outbreak of the crisis at the Chinese developer Evergrande, it fell to US$116 and, two months later, to US$92. Since then, the price has followed expectations for economic incentives from the Chinese government.
On Friday, iron ore was at US$131.84, the highest value since August 2022, with the prospect of further cuts in interest rates in China and concerns about the supply of the raw material. The Asian giant is the largest consumer of steel in the world, which makes Vale directly dependent on it.
“But investors do not see the current level of US$120 per ton as sustainable”, says a report from Goldman Sachs, which is neutral in relation to the purchase of Vale’s shares.
BB Investimentos recommends the purchase and sees potential for the share to reach R$94, which would be an appreciation of 31% in relation to the current price.
“The economic data released by China and the signs about new stimuli to be adopted should boost the stock again in the short term,” said the bank, in a report.
Santander also indicates the investment and predicts that the stock will reach R$88 next year. According to the bank, there is room for greater dividends and share buyback programs.
Regarding the third quarter, the company will distribute R$10 billion in dividends and JCP. It will be R$2.33 per share for anyone who has it in their portfolio on November 21st. Another way to remunerate shareholders is with a new share buyback program, through which Vale will acquire 3.5% of its capital, increasing the value of the shares remaining on the market.
In Guide’s assessment, the company is in a moment of transition, in which the results of the ore operation have been weaker, and the improvement in the production and sales of base metals has not yet come.
Even so, the broker recommends the purchase, with a target price of R$80, a potential appreciation of 12%, as the share is cheap. “Also because we believe that the risk of a sudden slowdown in results in the short term is low: historically, the price of ore has fallen more with an increase in supply, which should not occur in the short term, than with a reduction in demand.”