Earnings Watch: It's mining week

5 minutes to read
Peter Garnry

Chief Investment Strategist

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

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.