Of the 21 analysts covering BHP Billiton (BHP), seven analysts issued “buy” recommendations, 11 gave “hold” recommendations, and three gave “sell” recommendations on the stock. The consensus target price for the company is 27.8 Australian dollars, which implies an upside of 16.4% based on its current market price.
In comparison, mining peers Freeport-McMoRan (FCX), Southern Copper (SCCO), and Teck Resources (TCK) have been assigned mostly “hold” ratings by Wall Street analysts. On January 6, 2017, J.P. Morgan (JPM) reiterated its “sell” rating on the stock.
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Citigroup (C) upgraded BHP Billiton (BHP) stock from a “sell” to a “buy” rating on December 5, 2016. Citi isn’t very bullish about iron ore’s prospects, given the fundamental rebalancing needed. However, it has turned bullish in terms of its outlooks for other commodities.
Citigroup also upgraded its iron ore price forecast 21.6% for 2017 and 58.8% for hard coking coal. Citigroup is positive on the outlooks for oil, copper, and zinc in 2017. To reflect its positive stance, it has upgraded diversified miners such as BHP Billiton.
Following are the recent changes to BHP Billiton’s target prices:
Alliance Bernstein’s Paul Gait is impressed with BHP Billiton’s cost-saving efforts, noting, “In addition to having delivered more revenue, the company has saved more costs than we anticipated, hence the higher differential in EBITDA vs. revenue. The company reported that its unit cost in H1 FY2017 dropped 10% YoY in conventional petroleum, 37% at Escondida, 1% at WAIO, and 4% at Queensland coal.”
In the next part of this series, we’ll look at the consensus earnings estimates for BHP and explore the possibility of a revision in these estimates.