BHP (ASX:BHP) share price slumps ahead of today's results release

BHP's highly anticipated FY21 results is right around the corner, so why are its shares tanking?

| More on:
Sad looking miner holding his head down.

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

Investors are selling down the BHP Group Ltd (ASX: BHP) share price in the lead up to its FY21 results, which will be released at 5:00 pm on Tuesday.

At the time of writing, shares in the iron ore major are down 1.25% to $51.42.

BHP forecast to double profits

The BHP share price has tipped 2.73% lower this week despite an expected triple digit increase in net profit after tax (NPAT), according to Commsec's reporting season calendar.

BHP is forecast to deliver FY21 NPAT of US$16 billion, compared to US$7.956 billion in FY20.

The bumper result should come as no surprise after iron ore prices surged from ~US$100/tonne in July 2020 to well over ~US$220/tonne by the end of FY21.

Rio Tinto Limited's (ASX: RIO) recent half-year results should give BHP shareholders a solid preview of what to expect in today's upcoming results.

The mining giant reported a 71% increase in consolidated sales revenue to US$33,083 million while underlying earnings would surge 156% to US$12.2 billion.

As a result, Rio Tinto's Board declared a fully franked ordinary interim dividend of US$3.76 per share, up 143% on the prior corresponding period. There was also an additional fully franked special dividend of US$1.85 per share.

Based on Rio Tinto's closing price on the day of the announcement ($132.22) and current exchange rates, this equates to a yield of approximately 5.7%.

Why is the BHP share price tanking?

Analysts are increasingly concerned about how ASX 200 iron ore shares will perform once they trade ex-dividend.

In the case of Rio Tinto, its shares went ex-dividend on 12 August, resulting in a 6.88% fall from $129.14 to $120.26.

The Australian reported commentary from Morgans Financial analyst Adrian Prendergast who said "[investors] looking to lighten positions opportunistically in the big miners should consider waiting to see their full-year results, but then trim before these stocks go ex-dividend".

To add further insult to injury, Chinese steel production has plummeted to 15-month lows in the wake of government output mandates, according to Mining.com.

It reported: "The world's top producer made 86.79 million tonnes of crude steel last month, falling 7.6% from June and 8.4% from 93.36 million tonnes in July 2020, data from the National Bureau of Statistics (NBS) showed on Monday."

It's also reported that Beijing has begun inspecting steel mills to check that cuts in capacity and output are taking place, and shutting down outdated furnaces and limiting production at more heavily polluting plants.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »