On Friday, RBC (TSX:RY) Capital adjusted its price target on Glencore (OTC:GLNCY) Plc (GLEN:LN) shares, a leading commodities trading and mining company, to GBP5.40, down from the previous GBP5.50. Despite the reduction, the firm maintained its Outperform rating on the stock.
RBC Capital's adjustment comes ahead of Glencore's anticipated announcement on August 11 regarding a potential demerger of its coal assets.
The firm notes that recent shifts in perception toward coal and its future free cash flow (FCF) generation are influencing factors that could impact the company's decision. RBC Capital believes that the coal assets are likely to remain within Glencore's portfolio.
The firm anticipates that Glencore will outperform its peers, citing the company's attractive valuation and unique commodity exposure, as Glencore is the only major player in the market without iron ore operations. Additionally, the potential for special distributions is seen as a positive driver for the company's performance.
In the statement released, RBC Capital mentioned, "We expect Glencore to outperform peers driven by attractive valuation, commodity exposure (only major without iron ore) and the potential for special distributions." The firm's revised price target reflects a decrease from 550 to 540 pence based on a lower forecast for the company's FY24e EBITDA.
Glencore's upcoming decision on the coal demerger is expected to be a significant event for the company, with potential implications for its financial strategy and asset portfolio. The market will be closely watching the outcome of the August 11 announcement.
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