Barrick Gold (ABX) Stock Declining on Slump in Gold Prices

NEW YORK (TheStreet) -- Shares of Barrick Gold (ABX) are down by 1.58% to $11.51 in early afternoon trading on Friday, as the dip in the price of gold is driving some mining and related stocks lower today.

Strong jobs data for the month of May from the Commerce Department is contributing to the precious metal's drop.

Gold for August delivery is lower by 0.60% to $1,168.10 per ounce on the COMEX this afternoon.

The Commerce Department said 280,000 new jobs were added in May, the largest spike since the end of 2014 and higher than the consensus estimate of economists polled by The Wall Street Journal of 225,000.

Improvement in the labor market can clear the way for the Fed to hike up interest rates, which is expected to happen in the second half of this year, The Journal added. The publication noted that a rate hike can be bad news for gold, a non interest earning asset, as the precious metal can struggle to entice investors away from interest bearing assets when rates rise.

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 multiple 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 generally high debt management risk, weak operating cash flow, generally disappointing historical performance in the stock itself and unimpressive growth in net income."

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

  • The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • Net operating cash flow has decreased to $316.00 million or 45.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of BARRICK GOLD CORP has not done very well: it is down 23.52% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 change in net income from the same quarter one year ago has exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 35.2% when compared to the same quarter one year ago, falling from $88.00 million to $57.00 million.
  • 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, BARRICK GOLD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ABX Ratings Report

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