Bear Of The Day: BHP Billiton (BHP)

Commodity prices have been crushed lately with China to blame for much of the slide. The epic crash taking place in the country is wrecking havoc on a number of commodities with base metal products stepping front and center in this regard. As you might imagine, mining stocks like BHP Billiton (BHP - Analyst Report) are feeling the pain in this environment and could be in for more trouble ahead too.

And while prices for key mining commodities like iron ore have risen in recent days on the hopes of an end to the China market crash, the outlook is still quiet poor. Prices for ore that is delivered to the Chinese port of Tianjin remain depressed while analysts are looking for prices to stay near the 2015 lows as the year progresses. With this projection overhanging the market it shouldn’t be too surprising that analysts have been ratcheting down their earnings expectations for BHP for both this year and the next.

BHP Estimates

Earnings estimates for BHP have been crashing, much like the price of base metals. For the full year, we have seen the consensus drop from $3.20/share 90 days ago to just $2.66/share today, while the next year consensus has slumped from $2.60/share to $1.86 over the same 90 day period.

This contraction is baking in a truly terrible growth rate for BHP’s EPS as they are now expected to see earnings slide by 50% this year and then another nearly 30% the following year. Clearly with numbers like that this is a stock that you probably want to avoid in the near term.

It also doesn’t help when you look to the company’s momentum numbers as BHP currently receives a ‘C’ grade in this regard. EPS estimates have been falling faster than the industry average while its 52 week price change—nearly a 50% loss—isn’t exactly inspiring confidence either. For these reasons, it shouldn’t be too surprising to note that BHP currently has a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance from this company in the near term.

Other Picks

The mining-miscellaneous industry isn’t looking very good right now as it actually has an industry rank in the bottom 20% overall. There is a single hope in the industry though, the lone #1 ranked stock in the space, Platinum Group (PLG -Snapshot Report).

This company is expected to see strong EPS growth and the focus on precious metals should be less influenced by a broad China malaise. Additionally, the stock currently has a value score of ‘A’ making it a much better choice than BHP at least in the near term.