Welcome to Saxo Bank Hong Kong

Please select your language
Equities 5 minutes to read

Earnings Watch: It's mining week

Peter Garnry

Head of Equity Strategy

Summary:  The Q4 earnings season is coming to an end with 80% of the S&P 500 companies having reported. Now, European companies take the front seat in what will still be a busy week with around 250 earnings releases.


Our focus in this week’s Earnings Watch is on the miners and specifically two of the world’s largest – BHP Group and Glencore. In addition we zoom in on Baidu which is China’s largest search engine and is expected to report a mixed Q4 result.

BHP Group

The world’s largest miner reports FY19 H1 Tuesday before markets open in Europe with analysts expecting EPS $0.80 up 6% y/y and revenue of $22.1bn up 1% y/y. The biggest weakness halfyear-to-halfyear on EBITDA is expected to be in copper, which has suffered from slowing economic growth, while the petroleum segment is expected to show significant improvement in EBITDA. The key focus will be the company’s plant to reduce costs across all segments. In addition, management will update on what’s going on in Asia from a demand perspective which is interesting to watch for macro investors. 

Glencore

Glencore has underperformed its peers the past year and the recent Q4 production update suggests activity is still on the low side against expectations six months ago, driven by weakening macro conditions. The miner reports Q4 earnings on Wednesday before markets open in Europe with analysts expecting EPS of $0.16 and H2 EBITDA of $8.5bn up from $5.9bn a year ago. The stock is still valued at a discount to other large miners which could become a positive catalyst for the stock if it attracts a new long-term investors but the recent regulatory hurdles are still the key thing holding back investors from this low valued stock. The key risk short-term is Chinese growth which is critical for commodity prices. Another interesting focus in Glencore’s earnings is any mention of the outlook for electric vehicles and how the company sees that driving demand for cobalt, nickel and manganese.

Glencore weekly share price the past five years:
 
Source: Saxo Bank
Baidu

China’s largest search engine will report Q4 earnings on Thursday after the US market close with analysts expecting EPS CNY 12.10 down 41% y/y and revenue of CNY 26.3bn up 12% y/y leading to further profit margin declines which has been the ongoing theme for years now.

Baidu is fighting against a structural shift in the Chinese digital infrastructure away from desktops to mobile, which is negatively impacting the search engine business. At the same time the company has increased expenses on offline businesses, AI venture and its subsidiary iQiyi (the Netflix of China). The option market is pricing in a lot of volatility over the next month reflecting the near-term uncertainty. Despite these challenges Baidu is expected to generate CNY 35.2bn in free cash flow in FY18 which translate into a 10% free cash flow yield which is quite high in this low-yielding environment.

This week’s top 30 companies on market capitalisation reporting earnings including estimates on revenue and profits:
Source: Bloomberg and Saxo Bank
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.