Stressed Out & Thanks for Nothing: J.P. Morgan Says 'No Más' to Petrobras

 | Feb 04, 2016 | 9:00 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:


This article is part of a Real Money series on 20 distressed companies investors should consider adding to their distressed watch list.

Let's just call it a Real Money hat trick. On Thursday, Petroleo Brasileiro (PBR), better known as Petrobras, was downgraded to Underweight from Neutral by an analyst team at J.P. Morgan.

The Brazilian-based oil company is a member of Real Money's "Stressed Out" index. It is also Jim Cramer's nomination for TheStreet's "Worst Stock in the World" competition. Finally, Thursday's late-to-the-game downgrade gives the J.P. Morgan analyst team a Real Money "Thanks for Nothing" nod.

At least the J.P. Morgan team was humble about it. The opening remarks of the report cited the famous 1980 "No Más" boxing match between Sugar Ray Leonard and Roberto Duran, in which Duran -- who previously defeated Leonard -- threw in the towel at the end of the eighth round and said "No más," or "no more." (Side note: I highly recommend watching ESPN's 30 for 30 documentary on the fight, if like me, you weren't able to see the orginal match.)

"Like the former champion Mr. Duran in the eighth round when he quit the fight and the ring, we're saying, "No Más,"" Marcos Severine of JPMorgan wrote.

Reasons J.P. Morgan cited for Petrobras' downgrade included "very low Brent prices," devaluation of the Brazilian real, and the company's limited access to debt markets. Additionally, Petrobras faces debt payments totalling $23 billion between 2016 and 2017 and will likely have to tap debt and equity markets to meet those needs. However, its ability to tap debt markets its hindered both by its own credit rating as well as Brazil's credit rating, which is rated "junk" by Fitch, Standard & Poor's and Moody's.

Or, you could have listened to Jim Cramer when he filmed a video introducing TheStreet's "Worst Stock in the World" competition. Of Petrobras' problems, he cited low oil prices and the business climate in Brazil being only marginally better than Venezuela, which he deemed the worst. Finally, he mentioned -- adding insult to injury -- that a share of Petrobras' stock (ticker PBR) could be had for less than a six-pack of warm Pabst Blue Ribbon -- also known as PBR beer.

The Deal: Bloom Lake secures sale approval for iron ore mine 

Similarly, if you needed more reasons to be negative on Petrobras, you could have read Real Money's Antonia Oprita last week where she cited the company's below-investment-grade ratings by Moody's and Standard and Poor's and its debt to EBITDA (earnings before interest, tax, depreciation and amortization) of 6.28x as reasons to be wary of the company.

Shares of Petrobras are down 56% over the year and are now trading just above $3. The stock experienced a mild rally on Wednesday due in part to a rally in oil prices and Standard & Poor's affirming its BB rating on the company.

For more on Real Money's 20 distressed companies to watch:

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: 3-D Printing and Semiconductors Are Getting Slammed

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: Why the Big Steelmakers Are Tanking Today

Stressed Out: Is Avon Using Vanishing Cream on Its Cash?

Stressed Out: Sprint Is Collapsing Under the Weight of Its High-Yield Debt

Columnist Conversations

I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
View Chart »  View in New Window »
we will add this here to cheaply protect our downside a bit BOUGHT SPY SEP 244 PUT AT 2.70 ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.