Why is the BHP share price having such a stellar day?

BHP shares are up today. One US broker thinks there is more upside.

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Three mining workers stand proudly in front of a mine smiling because the BHP share price is rising

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Key points

  • Jefferies has put a price target of US$82 on US-listed BHP shares, implying upside of almost 20%
  • BHP has just divested its oil and gas portfolio to Woodside
  • Other brokers are mixed on whether the mining giant is an opportunity

It’s been a green day so far for ASX mining shares, with the BHP Group Ltd (ASX: BHP) share price leading the iron ore majors, up 3.2% at the time of writing.

Shares in ASX miner Rio Tinto Limited (ASX: RIO) are currently trading 2.75% higher and the Fortescue Metals Group Limited (ASX: FMG) share price is up 1.77%. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.5%.

What’s news for BHP today?

In positive news for BHP, leading US broker Jefferies believes shares in US-listed BHP Group Ltd (NYSE: BHP) could lift by around 18% from here. The ASX-listed company often follows the movement of the international-listed BHP shares so this could be a positive for the company’s Australian share price today.

As reported in The Australian, Jefferies has slapped a price target of US$82 on the energy giant, which is currently priced at US$69.21 on the New York Stock Exchange. The price target of US$82 therefore implies a possible rise of around 18% over the next year.

What’s been happening to the BHP share price recently?

Since 26 May 2022, BHP shares on the ASX have lifted close to 10%. However, the share price has been roughly flat over the last month.

At the start of June 2022, BHP announced that the merger of its oil and gas portfolio with Woodside Energy Group Ltd (ASX: WDS) via an all-stock merger had completed.

BHP shareholders received new Woodside shares. As part of completion, BHP has made a net cash payment of approximately US$0.7 billion to Woodside.

Approximately US$0.3 billion in cash will be left in the BHP Petroleum bank accounts to fund the ongoing operations. This reflects the net cash flows generated by BHP Petroleum, less cash dividends paid by Woodside to BHP, between the merger effective date of 1 July 2021 and completion.

BHP CEO Mike Henry said at the time:

The merger of our petroleum assets with Woodside creates a global energy company with the scale and opportunity to help supply the energy needed for global growth and development in a rapidly decarbonising world.

Our shareholders will now have exposure to assets in two organisations, BHP and Woodside, each with a very clear focus, strategy and value proposition. BHP’s world class portfolio is weighted towards commodities which support economic growth and have decarbonisation upside and combined with our operational excellence will underpin attractive returns and long-term value growth.

What do other brokers think of the mining giant?

Some of the other most recent broker ratings on the ASX mining share aren’t as optimistic as Jefferies.

For example, Morgan Stanley currently has a rating of ‘equal-weight’, which is essentially ‘hold’, on the BHP share price with a price target of $46.20. That implies no movement of BHP shares over the next year. The broker thinks that Rio Tinto Limited (ASX: RIO) is a better mining pick.

Ord Minnett also recently rated BHP a hold, with a price target of $45. That implies a slight decline of the BHP share price over the next year. The broker thinks that BHP may not generate as much profit in the medium-term, particularly if the iron ore price falls.

However, Macquarie is still optimistic about the business, with a price target of $57. That implies upside of more than 20%. It likes the decarbonisation-focused portfolio of commodities like nickel, potash and copper.

Motley Fool contributor Tristan Harrison 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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