Should I buy Glencore shares before it’s too late?

Glencore (LSE: GLEN) is a leading stock FTSE 100 Friday, up 5% in early trading. Prices have risen by more than 35% in the past five years.

Is it too good to pass up? Or have I missed the boat? The business runs in cycles. So I just have to ignore what the past price charts tell me, and look at the stock price.

Evaluation

There are currently seven price-to-earnings (P/E) ratio estimates. It looks like it will increase slightly in the next two years, but not by much. That looks cheap.

We also have a 10% dividend yield on the cards for 2023. But the sector where we see cuts.

In fact, Glencore’s dividend has been cut four times in the past decade, the last in 2020. Analysts expect it to drop, but still have more than 8% in 2025.

So what can move stock prices?

The merger offer

On April 3, the company announced its bid to merge with Teck Metals, and subsequently divest the combined coal business. Glencore shareholders will own 76% of the combined proceeds, with Teck shareholders owning the rest.

One hope is that it will deliver cost savings, and the board suggests we could see between $4.25bn and $5.25bn of post-tax synergy value.

So far, however, Teck has rejected the deal. Reluctance to enter coal and oil. And Glencore’s thermal coal business is slated to shut down by 2040.

Switch from coal

If a deal comes through, moving coal out of the core business at this stage sounds like a good plan to me. But it seems very much up in the air at the moment. If there is no further progress and no deal, I think Glencore shares could fall again.

And even if the new deal should close the merger, it will still take a few years to know how it will fare in terms of costs and synergies.

Glencore is due to post its Q1 update on April 26, and that could have an impact on its share price. Commodities will come under pressure in the first quarter of the current year, and markets may feel the pain from the global economy.

So it will be good to see how production and sales are at this stage of the year. Eyes, I guess, will be on China in particular.

Volatility risk

But now, Teck’s merger is unknown. And I think the stock price may go up and down a bit as it goes on.

Additionally, I like the long-term dividend outlook for Glencore. And I’m going to stick with it for the long term, so stock prices go up and down in the short term, don’t worry.

Will I buy it? I will wait and see how the merger plan develops. I think it can be fast in front.