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Why Barrick Gold (ABX) Stock Is Falling Today

Stocks in this article: ABX

NEW YORK (TheStreet) -- Barrick Gold (ABX) was falling 3% to $17.44 Monday after reports that merger talks with Newmont Mining (NEM) recently broke down.

According to Bloomberg, the two gold producers were recently engaged in talks that would combine them into one company. The talks halted when the two companies reportedly couldn't agree on which Australia and New Zealand mines to spinoff in a merger.

The talks followed a steep 28% drop in gold prices in 2013 that hurt profits for both miners.

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TheStreet Ratings team rates BARRICK GOLD CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate BARRICK GOLD CORP (ABX) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, BARRICK GOLD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $1,016.00 million or 39.23% when compared to the same quarter last year. Despite a decrease in cash flow of 39.23%, BARRICK GOLD CORP is in line with the industry average cash flow growth rate of -39.42%.
  • In its most recent trading session, ABX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income increased by 6.1% when compared to the same quarter one year prior, going from -$3,013.00 million to -$2,830.00 million.
  • The revenue fell significantly faster than the industry average of 7.6%. Since the same quarter one year prior, revenues fell by 29.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: ABX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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