Barrick Gold (ABX) Stock Retreating as Gold Prices Tumble

NEW YORK (TheStreet) -- Shares of Barrick Gold (ABX) are down by 6.05% to $6.91 in mid-morning trading on Friday, as stocks within the metals and mining sector take a hit due to the decline in the price of gold.

The price of the precious metal is trading in the red following strong U.S. jobs growth data, which is upping the likelihood the Federal Reserve will raise interest rates in December.

Barrick Gold is a Toronto-based gold and copper producer with mines in Canada, the U.S., Argentina, Peru, Australia, the Dominican Republic and Papua New Guinea.

Gold for December delivery is falling by 1.47% to $1,088 per ounce on the COMEX this morning.

For October, nonfarm payrolls increased by 271,000, the biggest gain since December 2014, Reuters reports. The unemployment rate declined to 5%, the lowest level since April 2008.

"With numbers like these, the Fed are almost duty bound to raise rates within this year," Mitsubishi metals analysts Jonathan Butler told Reuters

Higher interest rates can weigh on gold as the metal struggles to compete against interest bearing assets.

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 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 deteriorating net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

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 311.2% when compared to the same quarter one year ago, falling from $125.00 million to -$264.00 million.
  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 39.05%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 309.09% 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.
  • BARRICK GOLD CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BARRICK GOLD CORP continued to lose money by earning -$2.49 versus -$9.63 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus -$2.49).
  • You can view the full analysis from the report here: ABX

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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