BHP Group Ltd (ASX: BHP) shares have drifted lower this year, as we can see on the chart below.
But what's the outlook for the profit potential of the business?
Commodity prices can have a big impact on the profitability of a mining company. We don't know what resource prices are going to do next week, next month, or next year, so we can look at forecasts as a best guess. But, keep in mind that estimates can change.
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FY24
We're more than halfway through the 2024 financial year, and we recently saw the HY24 result.
However, the 2024 full-year profit is still to be determined.
The broker UBS' latest estimate suggested that BHP could generate a net profit after tax (NPAT) of US$13.5 billion in FY24, earnings per share (EPS) of US2.66, and pay an annual dividend per share of US$1.47.
UBS said it's seeing a risk of the iron ore and Escondida falling short of production guidance in FY24, with a meaningful lift needed in the second half to meet the mid-point of the guidance.
If the iron ore price stays at around US$100 per tonne then the business won't be as profitable as it could have been, if the iron ore price had remained above US$120 per tonne.
FY25
In FY25, the company is expected by UBS to generate a net profit of US$13.9 billion, which would be a slight increase compared to FY24. The projected EPS could come to US$2.74 in FY25, an increase of 3%.
UBS is also currently expecting a larger dividend per share of US$1.64 from the business, which would be a rise of 11.6%.
FY26
BHP is expected to see a profit decline in FY26 compared to FY25 (and FY24), with potential profit generation of US$12.1 billion. If that happened, the EPS could fall to US$2.38.
UBS has pencilled a dividend per share of US$1.43 in FY26, which would be lower than both FY25 and FY24.
Is this the right time to buy BHP shares?
With a cyclical business like this ASX mining share, I think the right time to buy is when there's a weakness with the commodity.
The iron ore price (and nickel price) has plunged from above US$140 per tonne, so I think it's much more appealing to buy BHP shares during this weaker period.
It's not as cheap as it could be, but I'm a bit more confident at this lower price. However, it should be said that miners aren't likely to be consistent ASX dividend shares.
