The Zacks Analyst Blog Highlights: Alcoa, OCI Resources, Solitario Exploration & Royalty, Asanko Gold and Primero Mining
For Immediate Release
Chicago, IL - October 13, 2015 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Alcoa ( AA ), OCI Resources LP (OCIR), Solitario Exploration & Royalty Corp. (XPL), Asanko Gold Inc. (AKG) and Primero Mining Corp. (PPP) .
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Here are highlights from Monday's Analyst Blog:
Forget Alcoa - Buy These 4 Mining Stocks Instead
The third-quarter earnings season kicked off on a weak note with lackluster earnings report from Alcoa ( AA ). The U.S. aluminum giant delivered yet another disappointing quarterly earnings as lower aluminum prices continued to hammer its legacy aluminum smelting business. The company's results are closely watched by investors as they shed light on demand trends for aluminum (a major industrial metal) across a wide gamut of industries, which is closely linked to levels of economic activity.
Alcoa's Dismal Q3
The New York-based company's profits for third-quarter 2015 plummeted roughly 70% year over year, hurt by lower metal prices. Both revenues and earnings for the quarter fell short of expectations. The company's outlook also indicated a slowdown across a number of markets in China.
Alcoa's primary metals business swung to a $59 million loss in the third quarter versus a profit of $245 million a year ago, hit by lower aluminum prices and a decline in regional premiums.
Aluminum prices remain under pressure due to supply glut. London Metal Exchange (LME) aluminum prices tumbled to a six-year low in September, hurt by oversupply of the metal amid waning demand from China due to a slowing economy. Weak aluminum prices have taken their toll on Alcoa's shares which are down roughly 34% so far this year.
The aluminum rout has triggered the company's move to separate its smelting and refining business from those that cater to rapidly growing aerospace and automotive markets. Alcoa envisions pricing pressure to continue into the final quarter of 2015.
Alcoa's outlook for China also paints a grim picture. The company has truncated its production forecasts for the country's automotive, heavy duty truck and trailer, and building and construction markets.
Alcoa has trimmed its automotive production growth forecast for China for 2015 and now sees a growth of 1%-2%, versus 5%-8% expected earlier. It has also lowered its forecast for Chinese heavy duty truck and trailer production, which is now expected to fall 22%-24% versus a 14%-16% decline expected earlier. Commercial building and construction sales growth estimate has also been cut to 4%-6% from 6%-8%.
Alcoa, a Zacks Rank #5 (Strong Sell) stock, is reeling under the effects of commodity bloodbath. Turbulent global markets, a stronger U.S. dollar and concerns over waning demand from China have weighed heavily on commodities this year. Fears that a possible hard landing of the Chinese economy would shrink the country's appetite for raw materials - from oil to metals - have cast a dark shadow over the commodity markets.
China's move to devaluate its currency in an effort to rouse its sleeping economy and push up exports has raised concerns about the country's buying power of U.S. dollar-denominated commodities. Fears of weakening demand from China amid a growing supply glut have led to a broad-based meltdown in commodities prices.
4 Alternative Bets in the Mining Space
While Alcoa is struggling, several other stocks in the mining space are in much better positions at present. We highlight the following mining stocks, which being armed with a solid Zacks Rank, are better options for investment amid the prevailing operating backdrop. Going by the Zacks model, companies sporting a Zacks Rank #1 (Strong Buy) or #2 (Buy) have strong chances of outperforming the broader market in the near term.
OCI Resources LP (OCIR)
The Georgia-based company is engaged in trona ore mining and soda ash production businesses in the U.S. and global market. It operates the business of its parent company OCI Wyoming LLC, from its facility in the Green River Basin of Wyoming. The company is gaining from its investment in accretive production expansion programs and remains focused on increasing distribution to its shareholders.
This Zacks Rank #1 stock has delivered a positive earnings surprise of roughly 5.4% in the last reported quarter. The company is expected to witness earnings growth of around 21.1% in 2015 and 3.7% in 2016.
Solitario Exploration & Royalty Corp. (XPL)
The Colorado-based company explores and develops precious and base metal properties across Peru, Brazil and Mexico. It mainly explores for gold, silver, platinum, palladium, copper, lead and zinc. Also sporting a Zacks Rank #1, the company is expected to witness earnings growth of 200% in 2015.
Asanko Gold Inc. (AKG)
Canada-based Asanko is engaged in the exploration and production of gold in Ghana, West Africa. Its flagship project is Asanko Gold Mine, located in Ghana. Construction of the project (Phase I) is 75% complete with fist gold production is expected in first-quarter 2016. This Zacks Rank #2 stock is expected to see earnings growth of roughly 42.9% in 2015 and 525% in 2016.
Primero Mining Corp. (PPP)
This Canada-based company acquires, explores and develops mineral resource properties in Canada and Mexico. The company mainly explores for gold and silver. It continues to see strong production results from its San Dimas mine.
Higher production from San Dimas and Black Fox properties are expected to lead to a double-digit rise in overall production for 2015. This Zacks Rank #2 stock has delivered positive earnings surprises in 2 of the past 4 quarters, with an average beat of around 45.8%.
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