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Analyst Blog

On Mar 24, 2014, we issued an updated research report on BHP Billiton Limited (BHP - Analyst Report). The company delivered strong earnings per American Depositary Share (ADS) in the first half of fiscal 2014, which increased 83% year over year to $1.52. Half-yearly revenues of $33.9 billion were also up 5.9% from the first half of fiscal 2013.

Additionally, BHP Billiton reported improved year-over-year production volumes for the first half of 2014. The company witnessed a rise in production of copper, iron ore, metallurgical coal, alumina, aluminium, manganese alloy and nickel. However, production of petroleum products and energy coal declined.

The company has been endeavoring to increase shareholders returns. In the past 10 years, BHP Billiton has returned $62 billion through share buybacks and dividend, roughly 50% of the underlying earnings over the same period. Moreover, the company intends to reconsider a progressive dividend policy from fiscal 2014-end.

Moreover, BHP has a number of projects in the pipeline, which are in different stages of development. While 6 projects delivered their first production in the first half of fiscal 2014, 10 projects are still in the pipeline, most of which are expected to start production before fiscal 2015-end.

Expected improvement in the future results led to positive earnings estimate revisions for fiscal 2014 and fiscal 2015. In the last 60 days, the Zacks Consensus Estimate for fiscal 2014 and 2015 improved 4.3% and 3.2% to $5.34 and $5.49, respectively.

Key Picks from the Sector

With a current market capitalization of $176.5 billion, BHP Billiton holds a Zacks Rank #2 (Buy). Other stocks worth a look in the industry include General Moly, Inc. (GMO - Snapshot Report), Augusta Resource Corp. and Avalon Rare Metals Inc. . While General Moly sports a Zacks Rank #1 (Strong Buy), Augusta Resource and Avalon Rare Metals hold the same Zacks Rank as BHP Billiton.

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