Company results are still coming thick and fast, with plenty on the horizon next week. But do any of them look like good investments right now? Here are three depressed commodities shares that you might want to consider over the weekend, ahead of their announcements:
It’s certainly not news that BHP Billiton (LSE: BLT) shares are falling, after they’ve lost 41% in the past 12 months, to 1,080p, as the prices of metals and minerals has been in a slump.
But for the year just ended, total production volumes rose by 9%, with chief executive Andrew Mackenzie saying “We have improved the performance of our equipment, reduced costs, and increased volumes despite a significant reduction in capital spend“. The resulting financial figures will be with us on Tuesday, when we get full-year results.
Earnings down
The City is still expecting another two years of falling earnings, which would push the P/E as high as 19 by 2016 (from the multiple of 12 expected for this year). So it’s still looking like a risky investment in the short term, although the tipsters are generally bullish.
Copper miner Antofagasta (LSE: ANTO), which is scheduled to deliver first-half figures on Tuesday, is in pretty much the same boat after a 12-month fall of 29% to 568p. The company’s first-half production report was less impressive, however, with copper production for the six months down 13% and sales down 16% — the latter apparently exacerbated by delayed shipments due to bad weather.
Production of gold, which is a handy by-product of copper mining, dropped 9%, but molybdenum production was up 42% (albeit on much smaller volumes).
At least forecasts for Antofagasta are more positive. There’s a 30% fall in EPS expected for this full year, which would give us a heady P/E of 27, but the 60% recovery on the cards for 2016 would drop that back to 16 — and that’s not outrageously expensive. On the other hand, analysts are evenly split between Buy and Sell recommendations.
My third for today is Petropavlovsk (LSE: POG), whose first-half figures will be with us on Thursday (on the same day as Gulf Keystone Petroleum‘s interim report, incidentally). The Russia-based gold miner has seen its share price drop 87% over two years, but it’s stabilised in 2015 and is actually up 15% since the end of December 2014, to 6.3p.
Saddled with debt
Brokers’ recommendations are scarce, with a two-to-one bearish stance. But with EPS forecast to fall by nearly three-quarters this year, to be followed by a pre-tax loss in 2016, that’s not altogether surprising.
In last month’s trading update, chairman Peter Hambro told us that “we maintained our focus on increasing efficiencies, controlling costs and maximising positive cash flows“, which means the company was struggling. Net debt at the end of June stood at around $600m, although that does represent a fall of $234m since December 2014, and the firm says it’s comfortably within its banking covenants.