The BHP Group Ltd (ASX: BHP) share price has come under pressure on Wednesday and dropped lower.
In afternoon trade the mining giant's shares have fallen over 3% to $37.59.
Is this a buying opportunity?
One leading broker that sees the BHP share price weakness as a buying opportunity is Ord Minnett.
This morning the broker retained its accumulate rating and $42.00 price target. This price target implies potential upside of almost 12% for its shares over the next 12 months.
If you add dividends into the equation, this potential return stretches to upwards of ~16%.
According to the note, BHP's iron ore production and shipments came in ahead of the broker's forecasts during the June quarter. Though, the average price realised of US$77.36 a tonne, was a touch short of expectations.
Looking ahead, the broker feels that the mining giant's iron ore production guidance of 244 Mt to 253 Mt and shipments guidance of 276 Mt to 286 Mt for FY 2021 might prove too conservative.
In light of this and strong iron ore prices, the broker sees potential upside risk to its earnings estimates for the year ahead.
Combined with its favourable commodity mix, attractive valuation, and outlook, it continues with its positive rating on the company's shares.
Should you invest?
I agree with Ord Minnett and would be a buyer of BHP's shares right now.
While I also like Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO), BHP remains my preferred pick due to the diversification of its operations, its strong balance sheet, and its growth opportunities.
Another positive is its dividend yield. The consensus estimate is for a fully franked dividend yield of over 4% in FY 2021. However, if iron ore prices remain strong, I suspect this yield could be even more generous.
