S32 - Macquarie rates the stock as Underperform
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South32 reported in line with forecasts and announced a special dividend, but FY guidance proved a major negative, Macquarie suggests, due to increased costs. Unit costs across various operations were 10-16% higher than expected.
Currencies are rising in South32's countries of operation, adding to the pressure, and Macquarie is forecasting commodity price declines. The stock continues to look attractive at spot prices, the broker notes, but this is more than outweighed by cost and production risks.
Downgrade to Underperform. target falls to $3.10 from $3.70.
Target price is $3.10.Current Price is $3.50. Difference: ($0.40) - (brackets indicate current price is over target). If S32 meets the Macquarie target it will return approximately -13% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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