BHP share price charges 5% higher on 'better than expected result'

BHP has impressed the market with its full year results…

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A group of people in suits and hard hats celebrate the rising share price with champagne.

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Key points

  • BHP's shares are charging higher on Tuesday
  • This follows the release of a better than expected full year result from the mining giant
  • One leading broker was pleased with BHP's performance

The BHP Group Ltd (ASX: BHP) share price is on the move on Tuesday morning.

At the time of writing, the mining giant's shares are up over 5% to $41.05.

Why is the BHP share price charging higher?

The BHP share price is rising on Tuesday after investors responded positively to the Big Australian's full year results.

For the 12 months ended 30 June, BHP reported a 16% increase in underlying EBITDA from continuing operations to a record US$40,634 million.

A key driver of this was the company's coal operations, which delivered stellar earnings growth thanks to sky high prices of the black gold. This helped offset softer iron ore earnings due to a pullback in prices of the steel making ingredient.

This ultimately allowed the BHP board to declare a fully franked final dividend of US$1.75 per share, which took its full year dividend to US$3.25 per share.

What was the reaction from brokers?

Analysts at Goldman Sachs have been looking over the result and given their verdict. They were pleased with its earnings and dividend, which both came in ahead of their expectations.

The broker commented:

Better than expected result with underlying EBITDA/NPAT of US$40.6bn/US$21.3bn, 2%/5% vs. our US$39.9bn/US$20.3bn estimates (and vs. Visible Alpha consensus of US$40.6bn/US$19.4bn). Headline NPAT of US$30.9bn included a US$1.1bn increase in Samarco liability provision and exceptional gain of US$7.1bn on the petroleum demerger. BHP reported an EBITDA margin of 65% and record ROCE of 48.7% for the year.

Capital management: final dividend of US175cps (74% payout on continuing operations, above minimum 50% target), above our US140cps forecast (65% payout ex Petroleum) and VA consensus of US170cps.

Where next for BHP's shares?

Goldman Sachs currently has a buy rating and $39.70 price target on its shares. This means the BHP share price is now trading ahead of this target following today's gain.

Though, it is worth remembering that this rating and price target could change once its analysts have updated their financial model. Stay tuned for that later this week.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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