The lowering of the US credit rating by Moody’s, which essentially aligns its outlook with that of Standard & Poor’s and Fitch, was seen as an eventuality by market participants. Meanwhile, I continue to like Petrobras SA ADR (PBR), observes Bryan Perry, editor of Cash Machine.
Soon after the markets opened lower Monday, with the 10-year breaching 4.5% and the 30-year Treasury seeing 5%, the bond market caught a midday bid. Treasury Secretary Scott Bessent stated the Moody’s downgrade is a lagging indicator and that current policy directives aim to bring down the federal deficit.
Petroleo Brasileiro SA (PBR)
Without much explanation or details as to what is the blueprint to slash the federal deficit, the market bought his response at face value. But I am highly skeptical of his position regarding this issue. Either he knows of a pool of endless money to buy the US Treasury auctions or there will be a shortage of buyers of US debt at some point.
As for PBR, it reported quarterly adjusted earnings of R$1.81 per share for the quarter ended March 31. That was lower than the same quarter last year, when the company reported EPS of R$1.85. Revenue rose 4.7% to R$123.30 billion from a year ago; analysts expected R$125.08 billion.
The mean earnings estimate of analysts has risen by about 9.4% in the last three months. In the last 30 days, there have been no negative revisions of earnings estimates. The current average analyst rating on the shares is “Buy.”
Recommended Action: Buy PBR.
