BHP Investors Braced For Earnings (BHP, RTP, AA)

On Tuesday (actually late Monday night in the U.S.), we’ll get to see earnings out of BHP Billiton Ltd. (NYSE: BHP). The estimates from First Call for the metal and mining giant were not calculated in dollars as it is based in Australia and might as well just be considered its own country.

This has been one of the more complicated companies to cover because of the global waves of mergers in metals and mining, plus it has been a huge winner in the global growth trade.  The fact that all these metals and miners are getting so large could even lead one to believe they are forming an international cartel or syndicate that controls supply to keep prices high. 

If Friday’s closing prices are any indicator and if the earnings were coming out immediately, it appears that options traders would be pricing in a move of up to $2.40 to $3.10 in either direction.  The problem is that options in this one and other global metals and miners have a huge added premium to them because of mergers.   Goldman Sachs recently made some gold changes on its Conviction Buy List.

Alcoa (NYSE: AA) taking a stake in Rio Tinto plc (NYSE: RTP) is just one more wrench in the machine there. 
We already noted how China didn’t want a BHP-RTP merger.

BHP Billiton’s 52-week trading range is $40.34 to $87.43, so it is still well off of highs even after a big run up on Friday.  The Lord Giveth, and The Lord Taketh Away."  This one recently fell 10% too, and  saw a 9% rise on Friday.

Jon C. Ogg
February 3, 2008