According to a Feb. 21 BMO Capital Markets research note, Glencore International Plc's (GLEN:LSE) 2017 EBITDA was $14.8 billion ($14.8B) and in line, "driving significantly increased shareholder returns," reported analyst Edward Sterck. The company achieved a profit of $5,508 million, or $0.39 per share. This surpassed consensus, which was $0.38 per share, but lagged BMO's forecast of $0.40 per share.
Revenue also was in line, at $205.5B. Adjusted earnings of $5.5B, however, were about 5% below BMO's estimate.
Dividends amounted to $2.9B, or $0.20 per share, for full year 2017. "This is well above the committed minimum of $1.0B plus $25% of industrial cash flows and two times our forecast of $0.10 per share," noted Sterck.
The analyst provided the EBITDA for each of four Glencore commodities, all of which have increased year over year:
1. Copper: $4.4B, up 31% since 2016 but 6% below BMO's $4.6B estimate
2. Zinc: $2.6B, up 37% since 2016 and 1% above BMO's estimate
3. Coal: $3.5B, up 47% since 2016 but 9% below BMO's estimate
4. Nickel: $633M, up 48% since 2016 and in line with BMO's estimate
Glencore indicated "strong performances from metal and minerals (+28%) and energy products (+9%)," added Sterck.
Regarding the company's balance sheet, net debt was $10.7B, down $2.2B from June, Sterck wrote. It came in about 7% lower than BMO's forecast and at the lower end of Glencore's estimated $10–16B range.
Looking to 2018, the miner only reduced guidance for nickel production by 2% and coal production by 3%. Otherwise, overall guidance for production remains unchanged, as it does for marketing. As for cost guidance, Glencore cut it for copper, zinc and nickel but raised it for coal.
BMO Capital has an Outperform rating and a £4.50 per share target price on Glencore, which represents a total potential return of 19%. The stock is currently trading at around £3.94 per share.
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Disclosures from BMO Capital Markets, Glencore Plc, Feb. 21, 2018
IMPORTANT DISCLOSURES
Analyst's Certification
We, Edward Sterck and David Gagliano, hereby certify that the views expressed in this report accurately reflect our personal views about the subject securities or issuers. We also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Glencore within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Glencore within the past 12 months.
Disclosure 6A: Glencore is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services.
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