Has BHP Billiton plc (NYSE:BBL) Improved Earnings Growth In Recent Times?
Assessing BHP Billiton plc’s (NYSE:BBL) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess BBL’s recent performance announced on 31 December 2017 and evaluate these figures to its long-term trend and industry movements. View our latest analysis for BHP Billiton
Did BBL’s recent earnings growth beat the long-term trend and the industry?
I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to analyze different companies in a uniform manner using the latest information. For BHP Billiton, its most recent earnings (trailing twelve month) is US$4.70B, which compared to the previous year’s level, has climbed up by a non-trivial 88.95%. Given that these figures are relatively short-term thinking, I have created an annualized five-year value for BHP Billiton’s net income, which stands at US$9.31B This means that, though earnings increased from last year’s level, in the long run, BHP Billiton’s earnings have been waning on average.
Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is feeling the heat. Although revenue growth over the past couple of years, has been negative, earnings growth has been declining by even more, meaning BHP Billiton has been ramping up its expenses. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US metals and mining industry has been amplifying average earnings growth of 53.76% in the prior year, and a flatter 0.50% over the past half a decade. This means that whatever uplift the industry is profiting from, BHP Billiton is able to leverage this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could be factors that are affecting the entire industry thus the high industry growth rate over the same time frame. You should continue to research BHP Billiton to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for BBL’s future growth? Take a look at our free research report of analyst consensus for BBL’s outlook.
2. Financial Health: Is BBL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
