When will the slump end for Glencore plc, Standard Chartered plc and Antofagasta plc?
Recovery priced in
Diversified miner and commodities trader Glencore (LSE: GLEN) is the biggest faller in the FTSE 100 over the past 12 months, with a 56% drop to 128p — and a 75% fall over five years. But since the start of 2016, Glencore shares gave actually regained 52%. So is the slump over?
The company has been working to get its balance sheet in a better shape as it was pretty much swamped by debt, and after a bout of asset disposals it’s greatly improved now — at least with a view to the longer term. After last year’s posted loss, we’re expecting to see a return to profit this year with a 45% rise in EPS forecast for 2017.
That would put the shares on a P/E of 23, which might seem a bit steep — but earnings levels would still be much lower than before the slump and there’s clearly a significant recovery priced in right now.
Glencore remains highly leveraged still, and it really would need commodities prices to continue along a uninterrupted upwards path. I think that makes Glencore still too risky, and I reckon this year’s gains could easily be lost before we get back to sustained growth.
Over at Standard Chartered (LSE: STAN), the bank that has been suffering from the Chinese slowdown, in addition to its own much-criticized management, things aren’t looking much better with a 47% share price fall to 547p. But Standard Chartered shares have been picking up again, with a 39% share price recovery since 11 February.
Although Standard Chartered has been working hard on a restructuring to get it back on a sound footing, operating income still declined by 24% in the quarter to March, and there’s only a small profit forecast for this year (although anything is better than last year’s loss).
With a recovery in earnings for 2017 forecast to reduce the P/E to 15, Standard Chartered could be on the mend — but when you can pick up Lloyds Banking Group shares on a P/E of 9.4 and Barclays on 8.3 for the same year, why would you take the risk?
A better miner?
Back to the mining sector again with Antofagasta (LSE: ANTO) now, in third place with a 12-month loss of 44%. Though as with the other two, Antofagasta shares have been recovering recently, with a 26% rise since 20 January to 437p.
The big risk for Antofagasta is that it is almost entirely dependent on copper, and the price of that metal has not been recovering the way iron ore has. In fact, the 2016 recovery has reversed in May, and copper prices are now hardly any higher than they were six months ago and are still way down over 12 months.
Add to that the 21% year-on-year fall in demand for copper from China in April, and I can see Antofagasta shares suffering further before there’s a sustainable recovery.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Recovery priced in
Diversified miner and commodities trader Glencore (LSE: GLEN) is the biggest faller in the FTSE 100 over the past 12 months, with a 56% drop to 128p ? and a 75% fall over five years. But since the start of 2016, Glencore shares gave actually regained 52%. So is the slump over?
The company has been working to get its balance sheet in a better shape as it was pretty much swamped by debt, and after a bout of asset disposals it’s greatly improved now — at least with a view to the longer term. After last year’s posted…