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Bear of the Day: Hudbay Minerals (HBM)


This year has been very challenging for metals miners with declining demand due to global slowdown and rising inventories. Disappointing results have in turn led to downward estimates revisions, sending Hudbay Minerals (NYSE: HBM) to a Zacks Rank # 5 (Strong Sell).

About the Company

Headquartered in Toronto, Canada, Hudbay is an integrated mining company with operations, development properties and exploration activities across the Americas, primarily focused on base and precious metals, including copper, zinc, gold and silver.

Disappointing Quarterly Results

On October 29, Hudbay reported its third quarter results.   The quarter resulted in an adjusted loss of $0.02 per share versus Zacks Consensus Estimate for earnings of $0.06 per share. The company has missed Zacks consensus in all of last four quarters with an average negative quarterly surprise of 123%.
 
During the quarter, metals production was generally below street estimates while mining costs were higher.

Downwards Estimates Revisions

Due to disappointing results, quarterly and annual estimates have been revised downwards in the past few weeks.

Zacks consensus estimate for the current year now stands at $0.06 per share versus $0.09 per share, 30 days ago. Declining estimates sent Hudbay back to Zacks Rank # 5 earlier this month.

The Bottom Line

While the company is trying to increase production and reduce costs, lower metals prices resulting from high inventories and global slowdown continue to act as headwinds.

HBM is currently a Zacks Rank # 5 (Strong Sell) stock. Further, the Zacks Industry rank of 198 out of 265 (Bottom 25%) indicates weakness in the near to mid-term.  Thus we think investors should avoid this stock for the time being.

Better Play?

Investors looking for exposure to the beaten-down mining industry could look at Dominion Diamond—a Zacks Rank #2 (Buy) stock.

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