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3 resource shares I think investors should get excited about

Credit: Lucas Walters

Reporting season often sees companies enjoy surges in share price when results meet or exceed expectations, but for these 3 companies, solid results have failed to excite hard-to-impress investors.

BHP Billiton Limited (ASX: BHP)

Shares in diversified natural resources giant BHP Billiton have sunk since the release of half-year results on February 20.

BHP shares opened up slightly to $30.43 today, but dropped from a close of $31.30 on the eve of its results announcement to hit a low of $29.81 on February 21.

Investors have failed to get excited about the future of the oil and gas goliath despite BHP logging an underlying profit rise of 25%, earnings per share up 25%, and a dividend payment up 38% on the same corresponding period.

BHP’s strong results were driven by the company’s copper segment, with the portfolio accounting for 28% of first-half EBITDA.

BHP Billiton investors were rewarded with a US$2.9 billion dividend bonanza with the interim pay out set at US55c per share – exceeding market expectations, but again, somehow failing to stimulate investors.

The failure to rally behind the company after strong results could be a result of broker recommendations to hold on the blue-chip resources share, but with a target price of $48.21 and guidance for FY18 within range, it’s been an underwhelming response from the wider market.

South32 Ltd (ASX: S32)

A diversified miner with assets including manganese, coal, nickel, silver and zinc, South32 Ltd, doubled dividends and logged a 14% increase in underlying profit when it released its first-half results on February 15.

Company management pointed to strong commodity prices offsetting lower volumes and broader inflationary pressure for South32, when its underlying profit came in well ahead of a UBS estimate of US$525 million by logging its US$544 million result.

But despite the healthy numbers, shares in South32 opened today at $3.26, down 12% on their pre-results price of $3.70.

Some analysts suggested South32 will suffer from cost escalation going forward after a focus on driving costs down so hard since its BHP spin off, with the proposed sale of South African coal interests also likely to see the company’s profit take a hit. Facts that may prevent investors from backing the share too hard.

Shareholders should be happy with the news South32 almost doubled its dividends on the previous corresponding period – with it also revealing a return of US$378 million to shareholders in dividends.

Orocobre Limited (ASX: ORE)

Share prices for the mineral exploration company focusing on the construction and operation of lithium, potash and boron projects in the Puna region of Argentina are down 3.1% today to $6.45 at the time of writing, as half-year results are released.

Orocobre Limited reported a first-half NPAT of US$8.2 million up from US$7.4 million on the prior comparative period.

Orocobre share prices had been pushing higher in the lead up to results, with a positive broker report out of Citi on February 13 upgrading the price target to $8 from $7.70.

The half-year report detailed Orocobre was on track to meet FY18 production guidance, with lithium market fundamentals expected to remain strong.

The company’s Olaroz lithium facility has booked the strongest results, boosting Orocobre’s overall balance sheet, with an announcement for production expansion plans at Olaroz and a lithium hydroxide plant to be constructed with Toyota Tsusho Corporation in Japan.

It will be interesting to watch the share price on these 3 stocks when the post-results season emotion clears and shareholders see dividends hit their bank accounts.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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