Earnings Previews: Where next for the Glencore and BHP share prices?

When will BHP and Glencore report results?

Glencore will report full year earnings covering 2021 at 0700 AM London time on Tuesday February 15.

BHP Group, which is dual-listed in Australia and the UK, will report earnings covering the six months to the end of December 2021, marking the first half of its financial year, at 0830 AM in Melbourne on the same date, or 2130 PM in London.

Earnings season: what to expect from mining stocks

Mining stocks have been rallying higher since early November, tracking a rise in commodity prices that have soared as the global economy continues to recover from the pandemic.

Iron ore, the key commodity for BHP Group, Rio Tinto and Anglo American – has soared over 60% since late October and currently sits at a six-month high, while the price of copper, another key commodity for all of London’s Big Four miners including Glencore, sits at a three-month high. Other commodities within their mix, spanning palladium to oil, have also spiked since late last year.

Having suffered from the drop in demand during the pandemic, miners were forced to accelerate debt repayments to shore up balance sheets and the entire sector is in a much stronger position now than a few years ago. Without as much debt hanging over them, stronger cash generation from higher prices should start to feed through to higher returns to shareholders while allowing miners to invest the huge sums needed into new and existing projects.

Dividends and buybacks will be the primary focus, alongside the outlook for 2022 as investors await to find out what the industry will spend the influx of cash on as commodity prices continue to climb higher.

Glencore earnings preview

Glencore has already revealed that copper production was down 5% in 2021 versus 2020, although this will be partly countered by higher prices. Production of zinc, lead, nickel, gold and silver also declined. We should gain better insight into how Glencore’s sprawling Marketing division – which trades the commodities produced by the company and third-parties around the world – performed when the results are released.

Analysts are expecting Glencore’s annual revenue in 2021 to have risen to $217.5 billion from just $142.3 billion the year before, with adjusted Ebitda forecast to jump to $20.5 billion from $11.6 billion.

The miner achieved its net debt targets earlier than expected when it released interim results back in August, allowing it to top up returns for shareholders. A special dividend worth $530 million (or $0.04 per share) and a $650 million share buyback in the first half means the miner has returned around $2.8 billion to investors in 2021. Investors can expect more returns in 2022.

Where next for the Glencore share price?

Glencore shares hit 428.4p yesterday, marking their highest level in almost a decade. However, that has acted as a ceiling for the stock for the second time in three weeks, suggesting it needs to close above here in order to eye even further gains after rising over 54% during the past 12 months. If it can break through that ceiling, then it can eye the 437p level of resistance during February 2012.

However, a severe drop in trading volumes, in addition to a bearish divergence on the RSI, suggests the current uptrend is running out of steam. Average trading volumes over the last 10 days has been just 18 million shares compared to the 20-day average of over 36 million. If the current ceiling holds as this suggests, then Glencore shares are likely to fall back toward the 50-day sma at 387p. The stock has fallen below the short-term moving average on numerous occasions over the last year but has always swiftly recovered, so this should be treated as a tentative floor, although we could see brief and temporary declines closer toward the 100-day sma at 374p.

BHP Group earnings preview

BHP has already revealed that copper iron ore production rose 4% in the first half of the year. This will be countered by lower output of copper and coal, although a surge in prices should comfortably offset the financial impact.

Analysts are expecting BHP Group to report revenue of $31.8 billion in the first half versus $25.6 billion the year before. Underlying attributable profit is forecast to rise to $$8.96 billion from $6.03 billion.

BHP ended June 2021 with just $4.1 billion worth of debt compared to the $12.0 billion it was burdened with a year earlier. The company said it planned to review its debt target to take the shake-up of its petroleum division into account and unveil it when it publishes its interim results. BHP is expected to pay a dividend of $1.24 compared to the $1.01 payout made the year before.

BHP agreed to merge its oil and gas operations with that of Australian outfit Woodside Petroleum, creating the largest energy producer listed on the ASX. The deal should close before the end of June, with BHP shareholders to own 52% of the company with the rest in the hands of Woodside investors.

That is part of BHP’s efforts to move away from dirtier forms of energy and concentrate on its core mining operations producing the likes of iron ore and copper. It is also getting out of the coal game, although a lot later than some shareholders wanted.

Importantly, BHP is no longer in the FTSE 100 after being removed following its unification plan that was completed earlier this year, leaving it with a primary listing in Australia and a standard listing in the UK.

Where next for BHP stock?

BHP shares hit a six-month high of AUD49.50 yesterday before coming under pressure as sellers returned to the market. If the current uptrend that started in the middle of November continues then the stock could climb toward AUD51 in order to close the gap created when the stock plunged last August. A move above there would be significant as it opens the door to the AUD54 all-time high hit last July.

The 50-day sma moved back above the 100-day sma last month, reinforcing the move higher in recent weeks, and is fast-approaching the 200-day sma. A new bullish signal will emerge if the short-term moving average stays on course and moves above the longer-term. The bullish RSI also supports a move higher.

However, the fact average trading volumes have declined to 31 million shares over the past 10 days compared to the 20-day average of 43.7 million shares suggests the current uptrend is losing momentum and the RSI is flirting with overbought territory. The first downside target is the 200-day sma at AUD44 but the 50-day sma at AUD43 looks more relevant.

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