Fortescue Metals Group Limited (ASX: FMG) shares will be one to watch closely later this month.
That's because the iron ore miner is scheduled to release its fourth-quarter update on 27 July.
Ahead of the release, let's take a look at what the market is expecting from the miner.
What is expected from Fortescue's Q4 update?
According to a note out of Goldman Sachs, its analysts are forecasting stronger than expected shipments for the three months.
The broker has pencilled in iron ore shipments of 48.8Mt, which is ahead of the consensus estimate of 48Mt. It will also be a 5% increase in shipments quarter on quarter.
Goldman isn't overly confident on iron ore prices. It is expecting Fortescue's lower-grade iron ore to command 87% of the benchmark 62% fines price. This will mean an average realised price of US$97 a tonne, which is down 11% from the third quarter.
One positive, though, is that the broker believes Fortescue's costs will remain flat at US$17.70 a tonne for the three months. This is a big win in this inflationary environment. However, it is worth noting that the market doesn't agree and is expecting an increase to US$18.50 a tonne.
Are Fortescue shares a buy?
Unfortunately, Goldman Sachs thinks investors should be staying well clear of Fortescue shares right now.
It currently has a sell rating and lowly $15 price target on its shares. Based on the current Fortescue share price of $22.16, this implies a potential downside of 32% for investors over the next 12 months.
Goldman believes its shares are vastly overvalued at current levels, particularly given the "uncertainties around Fortescue Future Industries (FFI) diversification and Pilbara decarbonisation." It believes these activities could have a negative "impact on dividend and balance sheet."
