BHP Group Ltd (ASX: BHP) shares caught the eye with market-beating returns in 2023.
But that was last year, what about the year ahead?
Let's see what analysts at Goldman Sachs is saying about the mining giant.
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Are BHP shares a buy in 2024?
Goldman Sachs has been looking at the Big Australian this week and remains very positive.
This is due partly to its belief that the iron ore sector will continue to perform strongly as analysts upgrade their estimates to reflect higher spot prices of the steel-making ingredient.
Goldman also highlights that the big miners are trading on lower-than-average multiples despite having a positive outlook. It explains:
We think the iron ore sector should continue to perform strongly near term due to MtM [mark to market] upgrades at spot and an improving outlook for capital returns in February. From a global mining perspective, the Top 20 global miners are currently trading on just ~4.5x NTM EV/EBITDA, well below the 25-yr historical average of 6.0x. This is despite strong balance sheets and supportive FCF relative to the past few decades, and a strong long run fundamental outlook for commodities.
In light of this, the broker has retained its buy rating and lifted its price target on BHP's shares to $50.50. This implies a potential upside of 5.6% for investors over the next 12 months.
In addition, its analysts are forecasting a US$1.50 (A$2.24) per share fully franked dividend in FY 2024. This equates to a 4.7% dividend yield and increases the total potential 12-month return to 10.3%.
The broker concludes:
We are Buy rated on: (1) Attractive valuation, but at a premium to RIO; (2) GS bullish copper and met coal; (3) Optionality with +US$20bn copper pipeline and improved production growth; (4) Robust FCF, but still below RIO. We continue to believe that BHP's major opportunity is growing copper production in Chile at Escondida and Spence, and growing copper production and capturing synergies in South Australia between Olympic Dam and the previous OZL assets.
