Glencore PLC (LSE:GLEN) has been the top pick for a number of analysts ahead of its third-quarter this coming Friday.
The commodities and mining giant's shares offer "attractive value", Barclays said, underpinned by the structural shift in coal markets being "ignored by the market".
Equity markets are overlooking the "structurally changed energy landscape" post the Russia-Ukraine war, with Glencore’s share price implying US$66 per tonne of thermal coal to perpetuity versus US$280/t 2027 'forward curve' prices.
An EU coal equivalent gas price at US$525/t also gives "significant incentive to switch, giving room for prices to run higher" into the northern hemisphere winter.
Barclays forecasts shareholder returns from both dividends and buybacks of 49% of market cap over 2023-24 using its base case forecasts, 50% using forward curves and 57% using spot prices.
Coal was also the attraction for Liberum.
Although the broker expects earnings across the sector to fall by 28% over the next year, driven primarily by weakness in copper, iron ore and coals, Glencore is recommended because of its strategic decision to run down its coal operations rather than make a complete exit.
As the US Department of Justice investigation winds down, Glencore pleaded guilty and will pay US$1.1bn in fines, new investors will emerge, Liberum believes.
However, results from Rio Tinto and BHP suggest wet weather in New South Wales and Queensland has been hurting volumes all year and "we expect a significant cut in Glencore guidance at its third-quarter numbers".