Shares in mining giant Glencore (LSE: GLEN) have staged a decent recovery this year, having more than doubled since their January low. But today they’ve fallen back a bit, down 3% to 145p, after the company’s first-quarter production report revealed a fall in output of some key commodities.
It shouldn’t have come as a surprise as Glencore announced late last year that it was cutting production of copper, zinc, lead, coal and oil in response to low prices — copper output was down 4% on the first quarter of 2015, with zinc down 28% and coal down 17%. But full year guidance remains largely unchanged, with the exception of a 0.3m bbl drop in oil due to reduced exploratory drilling. So are Glencore shares good value now?
With great progress made in debt reduction, commodities prices on the up again, and a return to strong earnings growth on the cards, I think the future is solid — even if Glencore shares are on a short-term high P/E.
Fashion boost
Next (LSE: NXT) shareholders, meanwhile, woke to sunnier news and to see their shares up 4% to 5,180p, despite the clothing chain reporting a 0.2% drop in sales between 31 January and 2 May (and a 0.9% drop in full-price sales). That ‘s at the lower end of the firm’s full-year sales guidance of -1% to +4% — and the company responded by lowering and widening it to a range of -3.5% to +3.5%, with pre-tax profit of between £748m and £852m indicated.
The increasing shift from in-store sales to online sales is also apparent, with full-price Next Retail sales down 4.7% in the period while Next Directory sales climbed by 4.2%.
Even with the small sales fall, the cash just keeps flowing — Next expects to generate £350m of surplus cash in the current year, and has already returned £181m through share buybacks and a special dividend.
Next shares are down 31% so far this year and on a forward P/E of 11, dropping to 10.6 on January 2018 forecasts, and for such a well-managed company that looks like a long-term bargain to me.
Banking upstart
Virgin Money (LSE: VM) shares spiked when the markets opened, but at the time of writing they’re down 2.2% to 346.5p, even though first-quarter mortgage lending came in 30% higher than a year ago, at £2.1bn.
With the bank having just a 3.4% share of the UK’s mortgage lending so far and the Virgin brand seen as a trustworthy one, there’s clearly significantly more scope for expansion than the bigger lenders and we could be in a golden age for the country’s challenger banks. Chief executive Jayne-Anne Gadhia was “delighted to report it has been another excellent quarter for Virgin Money,” and I can understand her enthusiasm.
The share price has been erratic, but since 20 January we’ve seen a 29% rise, and strong EPS growth forecasts suggest a P/E dropping as low as 8.5 by the end of 2017. Virgin Money shares could definitely be worth a punt.