Petroleo Brasileiro Petrobras SA (ADR) (PBR): Riding on a High Tide with the Hope of New Government

The Brazilian stocks touched a new height after a poll result favoring Marina Silva against President Dilma Rousseff came in. The biggest benefactor was the state-controlled energy firm Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). Its shares touched a 52-week high of $20.87 and closed at $20.65 on September 2, 2014.

According to the survey, Rousseff has lost popularity because of a sluggish growth rate of the Brazilian economy. The latest estimates state the president could achieve 36 percent support as compared to the 45 percent voters voting in favor of Silva. According to chief economist at INVX Global Partners, Eduardo Velho,

“It’s becoming clearer and clearer that Silva is the best chance for the opposition to win the election. This is boosting the stock market now, and the trend should last for some time as Silva gains more support. Both she and Aecio Neves are signaling that they would take very positive measures for the Brazilian economy such as cutting government expenses and reducing intervention.”

Petroleo Brasileiro Petrobras SA (ADR) (PBR)

In addition to it, Citigroup Inc (NYSE:C) analyst, Pedro Medeiros, pointed out three crucial factors from Silva’s platform that can have positive impact over the performance of Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). He added,

“The immediate correction to prices that had been restricted and the creation of mechanisms that allow visible adherence to market prices. PBR could increase its EBITDA by R$13 billion if gasoline and diesel prices are adjusted back to parity.”

In addition to it, an improvement in local competitiveness will allow Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) to get equipments at a lower price and work on better delivery time of its projects. TheStreet team has given a mixed response towards the share with the possibility of improvement in profit margins.

This article has been written by Prakash Pandey.

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