Key Takeaways
- Petrobras fell 15% today after Lula won Sunday’s runoff in Brazil with 51.8% of the vote. MercadoLibre, Ambev and LATAM Airlines also fell.
- The government controls Petrobras, so a fourth Lula term keeps the same people in charge of its spending and dividends.
- Petrobras’s capital spending has more than doubled since 2022, and over the same years its dividends have fallen from 94% of free cash flow to under 40%.
- Watch Petrobras’s third-quarter report in the coming weeks for signs of whether the dividend holds up.
Investors were betting that Bolsonaro would win in Brazil. They lost that bet, and Petrobras (PBR) is down 15% this morning.
President Luiz Inácio Lula da Silva won Sunday’s runoff with 51.8% of the vote to Flávio Bolsonaro’s 48.2%, weeks after losing the first round. No Brazilian candidate had ever lost the first round and gone on to win the final.
US-listed Brazilian stocks fell across the board. MercadoLibre (MELI), whose biggest market is Brazil, fell 12%, Ambev (ABEV) fell 12%, and Chile’s LATAM Airlines (LTM), with its big Brazilian domestic business, fell 9%.
Petrobras answers to Brasília
The government controls Petrobras, so the vote decides who sets its priorities for four more years. And Lula’s current term, which began in 2023, already shows what those priorities look like.
Petrobras’s capital spending has more than doubled since 2022…
…while its free cash flow has fallen by more than half, and the dividends it pays out of that cash have shrunk even faster:
In 2022, Jair Bolsonaro’s last year in office, dividends ate up 94% of free cash flow. In 2024 and 2025, they took under 40%. Investors had been betting a Bolsonaro win would turn that around. Another Lula term looks like more of the same.
TIKR tracks 10 analysts on Petrobras. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Petrobras, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Petrobras’ Analyst Ratings
The multiple can go lower
Before today, Petrobras traded at 4.5x forward earnings, a bit above its five-year average of 4.0x…
At this morning’s price, it’s closer to 3.6x, about half its April high of 7.3x. But the five-year low, 1.5x, came on Jan. 3, 2023, two days after Lula’s third term began.
The rest of the group fell on country risk. For MercadoLibre and Ambev, a 10% drop in the real, which reports say is possible, would shrink what their Brazilian sales are worth in dollars. LATAM fell less: it’s a Chilean airline, and Brazil is only part of its business.
I’d wait on Petrobras
Lula’s win hit all of these stocks, but Petrobras is the one whose dividend is at risk. I wouldn’t buy this dip yet. A cheaper multiple doesn’t help much if capital spending keeps eating the cash that used to go to shareholders, and the multiple fell much lower the last time Lula took office.
Of course, Lula will face a right-wing congress, and Petrobras’s third-quarter report in the coming weeks will show whether the dividend is holding up.
So what is Petrobras stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
