Glencore Hold Rating: Mixed Financial Performance and Operational Challenges Amidst Constrained Cash Generation

Goldman Sachs analyst Matt Greene downgraded the rating on Glencore to a Hold today, setting a price target of £3.10.

Matt Greene has given his Hold rating due to a combination of factors impacting Glencore’s financial outlook. The company’s recent financial performance showed a mixed picture with EBITDA meeting expectations, but free cash flow (FCF) underperforming, leading to an increase in net debt beyond forecasts. This trend of earnings meeting market expectations while FCF conversion falls short has been persistent, and management’s guidance for improved earnings in the second half is tempered by expectations of constrained cash generation.
Another significant factor in the Hold rating is the operational challenges Glencore faces, particularly in its copper division. Despite stable copper prices, operational delivery has not met expectations, with management needing to double output amidst ongoing risks like the cobalt export ban. Additionally, the company’s capital allocation strategy, including a $1 billion cost-out program and potential monetization of non-core assets, indicates a focus on managing financial pressures. These elements, combined with limited upside to the revised target price, contribute to the Hold rating, reflecting near-term pressures on FCF and operational performance.

In another report released yesterday, TR | OpenAI – 4o also reiterated a Hold rating on the stock with a p321.00 price target.