Markets

BHP Billiton Faces Pricing & Currency Woes; Scopes Scant

Stock prices increasing and decreasing in value
Credit: Shutterstock photo

On Nov 27, 2015, we issued an updated research report on premium basic materials company BHP Billiton LimitedBHP . One of the largest diversified resource firms in the world, the company's operations span across several continents. It is involved in exploration, production & processing of minerals, exploration and development of oil & gas, and steel production. However, despite its success in global trade, the company currently faces threats from external headwinds.

Looming Concerns

Unfavorable pricing conditions continue to weigh on BHP Billiton's top- and bottom-line results. Market prices of most products offered by the company such as iron ore have been weakening over time. Such pricing turmoil's are anticipated to adversely affect the company's revenues and hence earnings in the to-be-reported quarters. On the other hand, since the company aims to augment the productivity of iron ore for maintaining economies of scale in production, subsequent news of higher output has triggered negative sentiments in the iron ore commodity market. This is because rising output will only add to the global supply of the material, further weighing on its equilibrium prices.

Moreover, the company's international business remains exposed to several external headwinds. For instance, appreciation of the U.S. dollar has been hurting the company's foreign revenues in recent times.

Also, other operational issues such as mining disruptions, government permit problems, equipment shortages and labor crisis often increase the costs, and narrows the company's operating margins.

Few Scopes for Growth

We believe BHP Billiton can partially offset the above-mentioned negatives with benefits reaped from its strategic attempts to enhance shareholders' value as well as lower operational costs, and portfolio-simplification initiatives. For instance, the South32 de-merger will likely support the company's operational improvement in fiscal 2016 and help it earn greater cash as well as margins in the quarters ahead.

Stocks to Consider

BHP Billiton currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Taseko Mines Ltd. TGB , Vedanta Limited VEDL and Atlas Iron Limited AGODY . All three stocks hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BHP BILLITN LTD (BHP): Free Stock Analysis Report

VEDANTA LTD (VEDL): Free Stock Analysis Report

TASEKO MINES LT (TGB): Free Stock Analysis Report

ATLAS IRON LTD (AGODY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

VEDL BHP TGB

Other Topics

Stocks