While choosing a safe stock option, investors can take advantage of the professional advice of analysts. ASX-listed mining companies Allkem Limited (AU:AKE) and Orica Limited (AU:ORI) are two such options in the Australian market. These stocks have Strong Buy ratings from analysts.
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Furthermore, these stocks have earned high scores on the TipRanks Smart Score tool, indicating their potential to exceed market returns. Allkem boasts a “Perfect 10” score, while Orica scores nine out of 10 on the scale. This score evaluates stocks’ potential to outperform the market by considering eight essential factors, such as ratings, the buying or selling activities of hedge funds, as well as fundamental and technical aspects.
Let’s take a closer look at these companies.
Allkem Limited
Allkem is a specialized chemical manufacturing company that focuses on the production of various lithium chemicals such as lithium carbonate, lithium hydroxide, spodumene concentrates, and more.
Over the last five days, Allkem’s stock has gained more than 15% after the company announced its merger deal with U.S.-based Livent Corp. (NYSE:LTHM). The companies will merge through an all-stock deal worth $10.6 billion, resulting in the formation of the third-largest global producer of the metal utilized for manufacturing electric vehicle batteries.
According to the agreement, which is expected to be finalized by the end of 2023, Allkem shareholders will receive one share in the merged entity for each of their existing shares. Meanwhile, Livent shareholders will receive 2.406 shares in the new firm for each of their current shares.
Analysts believe this is good news for investors, as the merger would lead to a more robust and resilient balance sheet to fund potential future growth plans. Upon merging, the companies expect to achieve annual synergies of $125 million and one-time savings in capital expenditures amounting to $200 million.
Is Allkem Ltd. a Good Buy?
AKE stock has a Strong Buy rating on TipRanks, backed by 11 Buy and two Hold recommendations. The average target price is AU$15.96, implying a change of 7.7% from the current price level.
YTD, the stock has been trading up by 34.24%.
Orica Limited
Orica Limited is engaged in the manufacturing and distribution of commercial blasting systems as well as mining and tunneling support systems for the mining and infrastructure sectors.
Last week, the company reported its half-yearly earnings for 2023. The company posted a 31% jump in its revenues to $4 billion, attributed to its ability to pass on cost increases to its mining customers through higher prices. The earnings before interest and taxes increased by 32% to $323 million as compared to the first half of last year.
The company also declared an interim dividend of AU$0.18 per share, which is 30% higher than last year’s interim payments.
Orica believes the demand for critical minerals will stay strong amid the ongoing global energy transition, which will in turn lead to higher demand for its products and services. Post-results announcements, analysts also remain bullish on future prospects and have reiterated their Buy ratings on the stock.
Four days ago, analyst Andrew Scott from Morgan Stanley confirmed his Buy rating on the stock and predicted an upside of 23.8% in the share price.
Is Orica a Good Share to Buy?
According to TipRanks, ORI stock has a Strong Buy rating, based on six Buy and two Hold recommendations. The average price target is AU$17.95, which is 9.5% higher than the current price.
Conclusion
Analysts are optimistic about both Allkem and Orica based on the recent developments in these companies and have rated them as Strong Buy. Their bullish outlook on Allkem stems from its merger agreement with Livent. On the other hand, Orica’s stock has gained analysts’ confidence due to strong figures in its recent earnings report.
