Glencore H1 preview: where next for Glencore shares?

Miners like Rio Tinto and Anglo American have dished-out billions to shareholders after posting bumper profits in the first half as commodity prices push higher and the global economy recovers – will Glencore follow when it releases earnings later this week?

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When will Glencore release H1 results?

Glencore will release interim results on the morning of Thursday August 5.

Glencore H1 earnings preview: what to expect from the results

Glencore has already released production numbers for the first half, revealing output of its key commodities increased, including copper and zinc, while production of lead, nickel and coal declined due to a range of factors.

The raised output of its key metals will have allowed Glencore to capitalise on the significant improvement in prices. Average copper prices jumped to $9,370 per tonne in the first half of 2021 from $5,269 the year before when the pandemic started to weigh on demand, while zinc prices averaged $2,831 compared to just $5,269 last year.

Still, investors were disappointed as Glencore tweaked its targets for the rest of the year, cutting output expectations for zinc and nickel due to a slower than anticipated ramp-up of its new Zhairem mine in Kazakhstan and for coal because of weaker domestic demand for its South African operations and supply-driven reductions in output in Australia.

However, a key differential for Glencore is its Marketing business that trades its own  commodities and those produced by other miners from around the world. The unit has proven its ability to generate earnings through the commodity cycle, unlike its Industrial mining operations that sees its performance ebb-and-flow with prices.  

Glencore raised the bar for its Marketing division last month, stating it now expects to hit the top end of its wide $2.2 billion to $3.2 billion Ebit target range in 2021 as it capitalises on improving prices driven by the global economic recovery and government stimulus programmes. That would be largely in-line with the record $3.3 billion Ebit delivered by the unit last year.

Higher production coupled with the strong delivery from its Marketing arm means analysts are expecting Glencore’s overall performance to improve significantly in the first half. The consensus estimates the company will report a net profit of $3.14 billion compared to the $2.60 billion loss booked last year.

Adjusted Ebitda is expected to rise to $8.40 billion from $4.83 billion and EPS is set to be around $0.23 compared to a $0.20 loss the year before.

The dividend will be closely watched after payouts were reinstated at the end of 2020. Glencore temporarily suspended dividends when the pandemic hit in order to prioritise reducing debt, but swiftly hit its target and distributed $0.12 to shareholders at the end of the year.

Its London-listed peers have sprayed investors with cash after strong market demand and a recovery in prices delivered bumper earnings. Rio Tinto more than doubled its interim dividend to $3.76 from $1.55 and supplemented that with a special one-off payout worth $1.85, returning over $9 billion to shareholders in total. Meanwhile, Anglo American hiked its interim dividend to $1.71 from just $0.28 last year, worth $2.1 billion, complimented by a $0.80 special payout worth $1 billion and a share buyback worth another $1 billion.

Glencore shares have made a stellar recovery since hitting pandemic-induced lows in March 2020, having risen over 175%. Still, brokers remain bullish on Glencore as the global recovery continues. The 20 brokers that cover the stock currently have an average Buy rating and a target price of 370.68p, implying there is over 12% potential upside to the current share price.

Where next for the Glencore share price?

After rising steadily earlier in the year, the Glencore share price has been consolidating across the past three months. 

The Glencore share price has traded a relatively tight ranger, capped ion the upside by 340p and on the lower side by 290p.  

Glencore currently trades towards the upper end of this range, pushing back above its 50 dma last week. The MACD is also supportive of further upside.  

Buyers could look for a move above resistance at 340p to 360p 2019 high and towards 400p a level last seen in June 2018. 

Sellers might look for a move below 290p for a deeper selloff towards 270p the 200 dma and 230p the year to date low. 

How to trade Glencore shares

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