Own BHP shares? Here's your Q2 preview

What is the market expecting from the Big Australian? Let's find out.

| More on:
Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Next week could be a big one for BHP Group Ltd (ASX: BHP) shares.

That's because the mining giant is scheduled to release its highly anticipated second quarter update on 21 January.

Ahead of the release of the update, let's see what the market is expecting from the Big Australian.

Q2 preview

According to a note out of Goldman Sachs, its analysts are expecting a bit of a mixed quarter.

For example, copper production (100% basis) is expected to fall 2.5% quarter on quarter to 468kt with a largely steady average realised price of US$4.20 per pound. Whereas the consensus estimate is for flat production of 480kt for the three months.

Iron ore Pilbara shipments (100% basis) are forecast to increase 3.5% quarter on quarter to 74Mt. This is ahead of the consensus estimate for a smaller 2% increase to 72.9Mt.

Goldman believes that these shipments will have averaged a realised iron ore price of US$87 per tonne. This would be up 8.75% on the US$80 per tonne it recorded in the prior quarter.

Finally, met coal production is forecast to come in at 4.4Mt for the quarter. This is in line with the consensus estimate but would be a 2.2% decline on first quarter met coal production.

A average realised met coal price of US$203 per tonne is expected by Goldman, which is down 5.6% from the first quarter.

Finally, at the end of the quarter, Goldman believes that BHP will have a net debt position of US$10.7 billion. This is down from US$12.6 billion a year earlier but ahead of the consensus estimate of US$10.3 billion.

Should you buy BHP shares?

Goldman Sachs is seeing a lot of value on offer in the mining sector following a disappointing 12 months.

As a result, BHP shares are just one of a large number that the broker is recommending as buys right now. It said:

The Australian mining sector enters 2025 trading on ~5.0x NTM EV/EBITDA, ~0.8x NAV and a FCF yield of ~5% (market cap weighted averages), a premium (see Exhibit 1) to the major diversified miners (RIO, BHP & S32). We remain Buy rated on RIO, BHP, S32, CRN, WHC, CIA, DRR, ILU, BSL and Sell rated on FMG & NHC. We prefer companies trading at a discount to NAV and with either strong FCF or high production and earnings growth.

Goldman has a buy rating and $47.50 price target on BHP's shares. This implies potential upside of approximately 19% for investors over the next 12 months.

In addition, a 4.4% dividend yield is expected. This boosts the total potential return beyond 23%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

CSR share price rising asx share price represented my man in hard hat giving thumbs up
Materials Shares

Rio Tinto share price in focus on US$4.8b half year profit and dividend cut

Let's see how the mining giant performed during the first half.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Materials Shares

Is now a good time to buy Liontown shares?

Let's see what Bell Potter is saying about this lithium miner.

Read more »

Worker in hard hat looks puzzled with one hand on chin
Materials Shares

Guess which ASX 200 mining stock is crashing 12% on Wednesday

This miner is being sold off today. But why? Let's find out.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Materials Shares

Pilbara Minerals shares race higher on big news

Let's see why this lithium giant is getting a lot of attention today.

Read more »

Three miners stand together at a mine site studying documents with equipment in the background
Materials Shares

Forget BHP shares, this ASX mining stock could surge 18% higher

Let's see why this mining stock could be a buy according to analysts at Bell Potter.

Read more »

Worker looking at cement being poured out.
Materials Shares

How much upside does Macquarie tip for James Hardie shares?

While the broker is positive on the stock, some concerns remain.

Read more »

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Materials Shares

Liontown shares sink on tough quarter

This lithium miner is failing to roar on Tuesday. But why?

Read more »

Three miners looking at a tablet.
Materials Shares

Up 19% in a month: Top broker gives its verdict on the Fortescue share price

Is it too late to buy this mining giant's shares?

Read more »