BHP’s consensus rating
Of the 19 analysts covering BHP Billiton (BHP), four analysts have issued “buy” recommendations, 12 have “hold” recommendations, and three have “sell” recommendations on the stock. The consensus target price for the company is 27.50 Australian dollars, which implies a downside of 2% based on its current market price. Mining peers Freeport-McMoRan (FCX), Southern Copper (SCCO), and Teck Resources (TCK) have been assigned mostly “hold” ratings by Wall Street analysts.
Upgrades and downgrades
Credit Suisse (CS) downgraded BHP from “neutral” to “underperform” on December 7, 2016, and shifted its preference to Rio from BHP in 2017. The broker downgraded its 12-month average iron ore price forecast to $45 per ton, which implied downgrades for BHP.
Citigroup (C), on the other hand, upgraded BHP’s rating from “sell” to “buy” on December 5, 2016. While Citi isn’t bullish about the future prospects of iron ore due to the fundamental rebalancing needed, it has turned bullish on other commodities.
For 2017, Citi has upgraded its iron ore price forecast by 21.6% and its hard coking coal forecast by 58.8%. Citi is positive on the outlook for oil, copper, and zinc in 2017. To reflect its positive stance, it’s upgraded diversified miners, including BHP.
Changes in ratings
In the past year, the number of “buy” ratings for BHP has fallen 67%. BHP’s significant exposure to energy prices (USO) (UCO) through its Petroleum division may have caused some analysts to turn bearish on the stock. However, recently, OPEC’s (Organization of the Petroleum Exporting Countries) decision regarding production cuts boosted crude oil prices. The cut should be positive for crude oil’s outlook. Firmer iron ore prices have also helped BHP’s earnings estimates. In the next part of this series, we’ll look at consensus earnings estimates for BHP and explore the possibility of a revision in these estimates.