Although sales and earnings at BHP Billiton Limited (ADR) BHP have been hit by declining commodity prices, many product prices seem to be “nearing a cycle bottom,” Argus’s John Eade said in a report. He upgraded the rating on the company to Buy, while establishing a price target of $40.
Management’s FY17 FCF guidance of $7 billion assumes productivity gains and stable commodity prices.
Benefits To Earnings
Analyst Eade commented that BHP Billiton’s are poised to benefit from “stable-to-higher commodity prices,” with prices for many products nearing a cycle bottom. Argus analysts recently raised their rating on the Materials sector to Overweight.
Moreover, earnings may be boosted over time by “global economic stimulus measures” as well as production cuts in China.
Although BHP Billiton’s shares have outperformed the S&P 500 over the past quarter, they are trading substantially below their 10-year high above $100, the analyst commented.
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