Barrick Gold (ABX) Stock Falls on Slumping Gold Prices, Deutsche Bank Downgrade

NEW YORK (TheStreet) -- Shares of Barrick Gold  (ABX) fell 0.63% to $11.80 in afternoon trading Monday as gold prices traded near a four-year low and Deutsche Bank downgraded the stock.

Gold prices had their first consecutive monthly decline at the end of last week when they slumped to $1,160.50 an ounce, the lowest price since July 2010, according to Bloomberg

The decline in gold prices occurred thanks in part to the Bank of Japan, which helped strengthen the U.S. dollar when it bolstered its stimulus by increasing its annual target for enlarging the monetary base to 80 trillion yen, or $723 billion, up from a range of 60 to 70 trillion yen. The move sent the yen to a six-year low against the dollar.

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Is gold a buy? Watch the video below for analysis:

Gold for December delivery fell as much as 0.9% to $1,161 on Monday.

Deustche also downgraded the stock to "hold" from "buy" and cut its price target to $16 from $22. The firm cited more reasons than just falling gold prices.

"Despite an operationally solid 3Q14, we (again) are increasingly concerned on Barrick's ability to deleverage its balance sheet given headwinds facing the gold price, dimming prospects for its copper business and lack of strategic action on partnerships," the firm wrote in a research note.

"We have removed from our model contributions for Pascua-Lama, a key gold growth project which we had anticipated would attract a strategic partner to help shoulder remaining capex toward a projected 1Q18E production start-up. Recent news of proposed higher royalties in Zambia will stretch its Lumwana copper mine and could result in further writedowns."

Separately, 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 some concerns, 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 unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income 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 has significantly decreased by 27.3% when compared to the same quarter one year ago, falling from $172.00 million to $125.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.88% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to $852.00 million or 30.78% when compared to the same quarter last year. Despite a decrease in cash flow BARRICK GOLD CORP is still fairing well by exceeding its industry average cash flow growth rate of -42.33%.
  • BARRICK GOLD CORP's earnings per share declined by 38.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BARRICK GOLD CORP reported poor results of -$9.63 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($0.67 versus -$9.63).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, BARRICK GOLD CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: ABX Ratings Report

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