Zacks Investment Research downgraded BHP Billiton Plc. (BHP - Analyst Report) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold) on Mar 29.
Why the Downgrade?
BHP has witnessed sharp downward estimate revisions after reporting disappointing fiscal half-year 2013 results. On Feb 20, BHP Billiton reported half-year earnings per share of 79 cents, down 58.0% from $1.88 in the year-ago period. The company’s earnings were primarily hurt by lower selling prices as well as cost inflation.
BHP’s revenue also dropped 14.1% year-over-year to $32.2 billion, due to reduced prices of commodities as well as a challenging global industry. The price of BHP’s core product, iron ore, decreased drastically in the first-half of fiscal 2013, thereby pulling down the revenue. Upsurge in oil prices and rising core inflation in the emerging markets further added to the woes.
BHP Billiton faces industry-wide pressure from equipment shortages, labor crises and volatile metal and mineral prices. Its dependence on third party suppliers for mining equipment has risks. Moreover, depleting natural resources call for an improvement in ore grade and subsequent search for new mines, increased the R&D costs.
The Zacks Consensus Estimate for fiscal 2013 decreased 3.0% to $5.15 per share over the last 60 days. For fiscal 2014 also, the downward estimate revision pressure reduced the Zacks Consensus Estimate by 7.5% to $5.82 per share.
Other Stocks to Consider
The following mining stocks with favorable Zacks Rank are worth considering.
1. Dominion Diamond Corporation Co (DDC - Snapshot Report) carries a Zacks Rank #2 (Buy)
2. UR-Energy Inc. (URG - Snapshot Report) holds a Zacks Rank #2 (Buy)
3. US Energy Corp. (USEG - Snapshot Report) holds a Zacks Rank #2 (Buy).