On June 3, 2016, we issued an updated research report on premium basic materials company, BHP Billiton LimitedBHP . The company is one of the largest diversified resource firms in the world, with operations in several continents. It is involved in mineral exploration, production & processing, oil and gas exploration & development, as well as steel production. Although successful in global trade, the company remains challenged by external market headwinds.
BHP Billiton recently announced that it would soon implement a new strategy to enhance shareholders' returns and value in the near term. The company expects the strategy to assist it in generating higher profitability and productivity going ahead. In addition, BHP Billiton aims to increase its copper and shale asset base to ensure a surge in revenues once the commodity price improves. Also, new exploration activities and innovations are expected to support top-line and bottom-line growth rates over time.
The company's progressive dividend policy reflects its commitment to increase shareholders' wealth. However, it should be noted that the company's lucrative dividend policy needs to be supported by a superior capital management system. To this end, the company invests in high-return growth opportunities to generate capital to be deployed share buybacks and dividend return programs for its shareholders.
Also, the company's new operating model is expected to make its business more stable amid the volatile mining conditions. Per the new operating model, BHP Billiton would concentrate on three aspects of assets, namely safety, cost and volume. We believe that the company's margins expand in the upcoming quarters on the back of an overall improvement in its operational performance.
The current macroeconomic situation has posed several challenges for the mining industry. Sluggish economic growth in several emerging markets, weakening demand from major industrial goods consumers like China, uncertainties in financial markets, and volatility in the energy markets are likely to hurt top-line and bottom-line performance of BHP Billiton. Moreover, dismal commodity pricing continues to affect the company's revenues. Further, stiff competition exposes BHP Billiton to risks of market share loss and compels it to adopt price-cutting programs, which, in turn, are expected to adversely affect its revenues.
Other Stocks to Consider
BHP Billiton presently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the industry include Ciner Resources LP CINR , McEwen Mining Inc. MUX and Lonmin plc LNMIY . All the three stocks presently hold the same Zacks Rank as BHP Billiton.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.