Argus Is Buying Barrick Gold: Here's Why

Argus’ Bill Selesky upgraded the rating for Barrick Gold Corporation (USA) ABX from Hold to Buy, while setting a price target of $18 and citing improving fundamentals of the gold industry.

Barrick Gold’s shares have appreciated 89 percent, versus a gain of merely 1.8 percent in the S&P 500 Basic Minerals Index.

Barrick Gold reported 4Q15 net income of $91 million, or $0.08 per diluted share, down from $174 million, or $0.15 per share, in 4Q14. The decline in the company’s operating earnings reflected lower realized prices for gold and copper, which more than offset the increase in gold production.

Strengthening Financial Position Of Barrick Gold

Analyst Bill Selesky expects the US dollar to decline at least modestly this year, which in turn is likely to result in higher gold prices. The analyst pointed out that Barrick Gold has taken steps to strengthen its financial position in the last few years.

The company aims to reduce its debt by at least $2 billion in 2016, besides taking steps to lower overall operating costs and divest non-core assets.

The EPS estimate for 2016 has been raised from $0.40 to $0.42 to reflect higher near-term price expectations and lower cost assumptions for gold. Barrick Gold’s earnings are expected to grow 19 percent in 2017, Selesky commented.