Today I’m looking at the investment prospects of three Thursday headline makers.
Insurer edges skywards
Insurance giant Beazley (LSE: BEZ) has seen its shares move 1.7% higher in Thursday trading following the release of positive trading results for 2015.
The London firm advised that gross written premiums advanced 3% last year, to $2.08bn, a result that nudged pre-tax profit 8% higher to $284m. The company had a “benign claims environment” to thank for the solid performance, it said.
But looking ahead, chief executive Andrew Horton told Reuters that “the rating environment across catastrophe-exposed business, due to a lack of claims in 2015 and 2014, means that rates are going to continue to go down.” He added that “margins will be under pressure this year.”
With Beazley also suffering from intensifying competition, the City expects earnings to tank 13% in 2016, leaving the business dealing on a P/E rating of 15.1 times. This number is far from shocking, but considering that earnings risks continue to rise, I believe the insurer is an unappealing pick at the present time.
Copper play pleases investors
Copper digger Xtract Resources (LSE: XTR) has gone gangbusters in Thursday’s session following positive operating news — the stock was last dealing 7.5% higher from the prior close.
Xtract Resources advised that the processing plant at its Chepica gold and copper facility in Chile had been granted permission to restart on Friday. The plant has been down since late December following two fatalities at the site.
The mining play advised earlier this week that revenues slipped 16% between October and December from the prior quarter, to $375,802, although the impact of cost-saving measures propelled profits 39% higher to $208,269. Still, the bottom-line result missed expectations, and I reckon Xtract Resources should continue to be hit by falling ore grades and weak copper prices.
The number crunchers expect the Chilean digger to report earnings of 0.02p per share in 2016, resulting in an ultra-low P/E rating of 9 times. But given the poorly state of the copper market, I believe investors expecting sustained earnings rises could end up disappointed.
Stuck in a hole
Shares in embattled mining play Lonmin (LSE: LMI) have also exploded higher in Thursday trade due to a solid bump in metal prices.
Thanks to fresh US dollar weakness, platinum was recently at week-long peaks above $880 per ounce, while sister metal palladium burst back above the critical $500 marker. This renewed strength pushed Lonmin’s share price 15% higher from Thursday’s close.
However, I reckon this near-term strength represents nothing more than a fresh selling opportunity. Lonmin advised last week that it expects “a low pricing environment will persist in the short to medium term,” and subsequent restructuring has seen the business cut more than 5,000 jobs in the past quarter alone.
But as demand indicators continue to worsen, and wider economic conditions propel the dollar steadily higher in the coming weeks and months, I reckon Lonmin’s share price should resume its crushing downtrend.
