BHP Billiton PLC (LON:BLT) extended its falls following Tuesday’s disappointing first-half results as both Deutsche Bank and Citigroup downgraded their ratings for the world’s biggest miner.
In late morning trading, the FTSE 100-listed firm’s shares were down 1.9% to 1,462.4p, having shed over 4.5% yesterday.
READ: BHP Billiton posts 25% jump in underlying half-year profit, but misses consensus
In a note to clients, analysts at Deutsche Bank cut their stance on BHP Billiton to ‘hold’ from ‘buy’, reducing their target price to 1,700p from 1,900p, citing valuation grounds.
They pointed out that the Anglo-Australian firm’s half-year underlying earnings were 2% below Deutsche Bank’s estimates and 5% below consensus due to higher costs for metallurgical coal, copper and iron ore costs.
The analysts noted that current year and medium-term unit cost targets now appear challenging.
They cut their earnings per share forecasts for BHP Billiton by 11%-12% for full-year 2019/2020, after lifting their costs estimates, pulling down their price target and rating, as a result.
The analysts concluded: “The value and returns strategy remains compelling but appears priced in.”
Citigroup cuts to ‘neutral’, leaves target unchanged
Meanwhile, analysts at Citigroup cut their rating for BHP Billiton to ‘neutral’ from ‘buy’ while leaving their target price unchanged at 1,550p.
They said the interim result was weaker than expected, and net debt is still not in the targeted range, although they expect it to be there by the end of the current year.
The US bank’s analysts added: “Productivity gains were always going to be a challenge due to the major shutdown of Olympic Dam (OD), but were made worse by the Qld Met Coal issues to drive a negative US$0.5bn impact.
“With OD back up and 3 Escondida concentrators running BHP should get back close to square by end-FY18, which will require the US$2b productivity gains targeted to be all delivered in FY19.”
They said they prefer buy-rated mining peer Rio Tinto PLC (LON:RIO) for their diversified mining sector exposure.