Glencore Plc (GLNCY) delivered a mixed update on Monday increasing earnings guidance for its marketing division for a third time this year but cutting forecast output for key copper, zinc and coal mining operations.
The mining and commodities trading giant's London-listed shares opened about 1% lower at 361 pence as investors initially chose to see the glass as half-empty, though the stock rose later in the morning session to trade at 369 pence, up almost half a percentage point on its Friday close.
RBC Capital market's analysts hailed the results, noting that Glencore's weaker production may actually have helped boost prices for key commodities including zinc and copper - providing a boost to the trading result.
"As we mark actual third quarter commodity prices in our model, the production misses were completely offset and actually cause a slight uplift in (Glencore's) EPS (earnings per share," noted RBC.
Rising commodity prices tend to be positive for trading companies, which benefit from locking in acquisition prices prior to selling the commodities on to end users. Glencore's CEO Ivan Glasenberg said in August that the market movements had provided greater opportunities for arbitrage deals - where traders are able to use price differentials to guarantee profitable trades.
Prices for copper and zinc, two of Glencore's biggest commodities in terms of trading volume, have gained almost 25% since the start of the year.
"Full year 2017 Marketing EBIT guidance increased to $2.6 to $2.8 billion, reflecting a strong Q3 performance (previously $2.4 to $2.7 billion)," said Glencore in its third quarter production report. Earnings at Glencore's trading unit are largely opaque and the company gave no explanation of the reason for the improvement. Glencore may also have benefited from greater volumes in its oil trading business, after it secured new barrels out of Russia as part of an investment it made in OAO Rosneft last year.
On the mining side of the equation, production at all three of Glencore's major operating sectors missed analyst expectations.
Copper production guidance was cut to 1.31 millon tons for the year, down from 1.33 million tons. Forecast zinc production fell 25,000 tons to 1.1 million tons, while coal production was cut 6% or 8 million tons to 124 million tons.
"Overall a weak set of results," noted Goldman Sachs analysts. "While marketing EBIT guidance was increased, this is likely to be offset by the weak operational production/lowering of guidance, and we expect the stock to underperform today."
Separately, the Financial Times reported that Glencore will cancel its secondary listing on the Hong Kong exchange as the uptake in shares on the Asian market had proven underwhelming since Glencore's IPO there in 2011.
More of What's Trending on TheStreet: