For Immediate Release Chicago, IL – September 28, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includethe Caterpillar Inc. (CAT), Thompson Creek Metals Company Inc. (TC), Silver Standard Resources Inc. (SSRI), Randgold Resources Limited (GOLD) and Sandstorm Gold Ltd. ( SAND). Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free. Here are highlights from Friday’s Analyst Blog: 4 Mining Stocks to Dump on Caterpillar's News The world's largest maker of mining and construction equipment, Caterpillar Inc. ( CAT) has further cut down its revenue outlook for 2015 citing continued weakness in the mining industry due to global slump in commodities. This paints a gloomy picture for the mining industry as Caterpillar is a global supplier of mining and construction equipment, and often considered a bellwether of economic activities. Caterpillar’s shares lost 6.27% of their value in a day after the company announced a trimmed revenue guidance of $48 billion yesterday, which is $1 billion lower than the previous expectation. To make matters worse, the company expects sales to decline further by 5% in 2016.
This, however, is not unexpected since Caterpillar’s sales bore the brunt of weak mining in the last two years as its mining customers slashed capital spending in the middle of a capacity glut, and it also faced drop in prices for coal, iron ore and other metals as well as slower economic growth in China and other developing countries. Nevertheless, this announcement sends out a red signal for the mining industry. In case Caterpillar’s sales decline next year, in line with its guidance, the company’s revenues would dip for four consecutive years for the first time in its history of 90 years.
To cope with the impact of weak mining demand on its revenues, Caterpillar has perked up its cost cutting initiatives by closing down plants, laying off workers and lowering Selling, General and Administrative (SG&A) costs.
The bearish phase of the mining market has dealt a blow to Caterpillar’s long-term objective of becoming a dominant global player in the mining space. Previously, Caterpillar has been riding a wave of heightened construction and mining activity in developing markets, triggered by the demand for coal, copper and iron ore. The company also aggressively expanded in mining when the market was stronger. In an attempt to be a leader among the global mining original equipment manufacturers, the company acquired Bucyrus in 2011 for $8.8 billion. The buyout resulted in the most expansive product offering in the mining equipment industry. However, the slowdown in China, the world’s top metals consumer, has dragged down the industry as well as Caterpillar along with it.
Commodities are languishing at multi-year lows. The threat of oversupply looms large on the industry as inventory continues to pile up, while the once frenzied demand in China has fizzled out. Overall, metal prices will remain depressed until the supply glut is eased by production cuts. We expect slashing of capital expenditure, suspension of operations and cost saving initiatives to be in the cards. In line with Caterpillar’s poor outlook, which is a downer for the mining industry, we suggest mining stocks to steer clear from at the moment. We have screened mining stocks that have a Zacks Rank #5 (Strong Sell) and witnessed downward estimate revisions over the past few months.
Mining Stocks to Avoid
Thompson Creek Metals Company Inc. (TC)
Headquartered in Littleton, CO, Thompson Creek Metals Company Inc. engages in mining, milling, processing, and marketing of copper, gold and molybdenum products in the United States and Canada
Thompson Creek currently carries a Zacks Rank #5 (Sell) and has delivered a year-to-date return of -70.06%. The stock has failed to match the Zacks Consensus Estimate in 3 of the past 4 quarters, with an average negative earnings surprise of 167.71%. The company’s earnings are expected to decline 176% in fiscal 2015. Moreover, estimates of this company have been undergone substantial negative revisions in the past 60 days.
Silver Standard Resources Inc. (SSRI)
Headquartered in Vancouver, Canada, Silver Standard Resources Inc. engages in the acquisition, exploration, development, and operation of precious metal mineral properties in the Americas.
Estimates of this Zacks Rank #5 (Strong Sell) stock have moved southward over the past 60 days. The stock has delivered an average negative earnings surprise of 238.29% in the past four quarters.
Randgold Resources Limited (GOLD)
Based in St. Helier, the Channel Islands, Randgold Resources Limited explores and develops gold deposits in Sub-Saharan Africa. It holds interests in the Morila gold mine, the Loulo gold mine, and the Gounkoto gold mine, which are located in Mali, Western Africa; Tongon mine located within the Nielle exploitation permit in the north of Côte d'Ivoire; Kibali mine located in the Democratic Republic of Congo; and the Massawa project located in Senegal. This Zacks Rank #5 stock has failed to match the Zacks Connsensus Estimate in three of the last four quarters, averaging -13.36%. Moreover, estimates have been revised downwards over the past 60 days. To top this, Randgold’s fiscal 2015 earnings is projected to drop 21.20% year over year. The stock has a negative year-to-date return of 9.02%.
Sandstorm Gold Ltd. (SAND)
Headquartered in Vancouver, Canada, Sandstorm Gold, a resource-based company, focuses on acquiring gold and other precious metal purchase agreements and royalties from companies that have advanced stage development projects or operating mines.
This Zacks Rank #5 stock has delivered an average negative earnings surprise of 316.67% in the past four quarters. Moreover, estimates have been revised downwards over the past 60 days. Sandstorm Gold’s fiscal 2015 earnings are projected to drop 156.25% year over year. The stock has a negative year-to-date return of 14.71%.
Bottom Line
Exiting certain underperformers at the right time helps maximize portfolio returns. With a bleak outlook for the mining industry as indicated by Caterpillar’s guidance, we believe it will be a prudent move to get rid of these stocks at the moment.
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