BHP Group Ltd (ASX: BHP) shares will be on watch next week.
That's because the mining giant is scheduled to release its highly anticipated half year results on 20 February.
Ahead of the release, let's see what the market is expecting from the Big Australian.
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BHP half year results preview
According to a note out of Goldman Sachs, its analysts are expecting the company to report underlying EBITDA of US$12.2 billion. This is a touch lower than the consensus estimate of US$12.35 billion.
The consensus estimate comprises underlying EBITDA of the following:
- Copper – US$4.896 billion
- Iron ore – US$7.282 billion
- Coal – US$627 million
- Group and unallocated – US$550 million loss
Goldman is also forecasting underlying earnings of US$5.1 billion for the six months ended 31 December. This is expected to underpin an interim dividend of 50 US cents per share according to the broker, which is just ahead of the consensus estimate of 49 US cents per share.
At the end of the period, Goldman believes that BHP will have a net debt of US$11.9 billion, whereas the consensus estimate is US$11.8 billion.
Should you buy BHP shares?
Goldman Sachs thinks that BHP's shares are great value at current levels and has named several reasons why they could be a buy. The broker said:
We continue to rate BHP.AX a Buy based on: 1. Attractive valuation, but at a premium to RIO: BHP is currently trading at ~5.9x NTM EBITDA, below the 25-yr average EV/EBITDA of 6.5-7x, but at a premium to RIO on ~5.0x; but at ~0.8x NAV which is in-line with RIO at ~0.8x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
We remain bullish on copper due to ongoing supply side challenges and increasing demand and expect BHP's copper EBITDA to increase by ~US$5bn to ~US$12bn by FY26E (~45% of group EBITDA). Under our base case, copper EBITDA is expected to reach US$14bn by FY35E and ~US$19bn with all copper growth, at GSe long run copper of US$4.57/lb (real $, from 2028).
It has a buy rating and $46.80 price target on BHP's shares. Based on its current share price of $41.30, this implies potential upside of 13.3% for investors over the next 12 months.
In addition, a fully franked 4% dividend yield is expected in FY 2025, boosting the total potential return to beyond 17%.
