Shares in ASX resources giant BHP Group Ltd (ASX: BHP) are sliding from the open today and now trade at $46.98 apiece.
Following the release of the miner's better than expected half-yearly results yesterday, analysts at several investment firms have chimed in on BHP's investment debate. Let's take a closer look.
Is BHP a buy after its strong earnings?
Analysts at Australian investment bank Macquarie were quick to jump in on the commentary. They note BHP's strong cash flow result underpinned by working capital management in 1H FY22.
This enabled BHP to declare a stronger than expected dividend payout. This trumped analysts' estimates at both that level and the net profit level.
In fact, the mining giant's underlying results were 6%-8% higher than what Macquarie had baked into its own modelling, according to the broker.
It was happy with the company's balance sheet and amount of leverage at 31 December. Macquarie responded to management's guidance on net debt.
"Post dividend payment," the broker said, "BHP's net debt will have increased to $13.7 billion, within the new wider guidance range." That compares to roughly $6 billion at the end of 2021.
It will be interesting to see what this will mean for the BHP share price.
Meanwhile, over at RBC Capital Markets, analysts note that BHP's debt guidance of $5 billion to $15 billion still leaves plenty of headroom for the miner to make acquisitions, future buybacks, or bump its dividend further.
Not to mention, if commodity prices continue their current rally, the upside case is even stronger for this to happen, according to the broker.
RBC analysts reckon BHP's results were an "incremental positive". They suggest investors might continue bidding up shares on what are "already very strong market perceptions" of the miner.
BHP has managed to "drive a successful unification" whilst posting "a very strong half-year financially, leaving the group with a blank canvas for future M&A or cash returns," the broker says.
Macquarie rates BHP as a buy and values the company at $51 per share. Whereas RBC has its rating as sector perform with a $46 price target.
After a string of broker updates yesterday, the consensus still has BHP weighted towards a hold. The average price target is $46.23, which is a small amount of downside potential yet to be priced in.
BHP share price snapshot
The BHP share price has had a difficult year, although it has regained steam lately. In the last 12 months, BHP shares are barely breakeven, 0.03% in the red based on the current price. Although they are up 13% year to date.
On closer inspection, the BHP share price has tracked the S&P/ASX 300 Metals & Mining Index (ASX: XMM) closely over the last year, as shown in the chart below.
