Majority recommend “hold”
Currently, seven analysts have a “buy” recommendation, nine have a “hold” recommendation, and three have a “sell” recommendation for BHP Billiton (BHP). The consensus target price is 19.90 Australian dollars, which implies a downside of 2% as compared to the current market price.
Shaw and Partners is the most bullish on the stock, with a “buy” rating and a target price of 26.50 Australian dollars. The stock’s lowest target price of 15.00 Australian dollars comes from Clarkson Platou Securities.
Since the beginning of the year, the number of “buy” ratings for BHP have decreased by 30% while its “sell” ratings have increased by 50%. Compared to other diversified miners, BHP’s significant exposure to energy prices (USO) (UCO) through its Petroleum division might have caused some analysts to turn bearish on the stock.
Not many analysts have changed their ratings for BHP Billiton (BHP) (BBL) in the last few months. Most recently, Bernstein maintained its “market perform” rating for the stock. Macquarie also reiterated its “underperform” rating on the stock on May 26, 2016.
Factors impacting earnings estimates
Commodity producers’ earnings are sensitive to underlying commodity prices (USCI). It’s worth noting that analysts’ recommendations and target prices are based on expected forward earnings. In the next part of this series, we’ll look at consensus earnings estimates for BHP and explore whether there is a possibility of a revision in these estimates.