South32 Ltd (ASX: S32) shares will be in focus next week.
That's because the mining giant is scheduled to release its full-year results on Thursday 24 August.
But what are analysts expecting from South32? Let's find out.
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South32 FY 2023 preview
According to a note out of Goldman Sachs, as with most miners, its analysts are expecting South32 to report a sharp drop in profits in FY 2023 due to softer commodity prices and higher costs.
Firstly, on the top line, the broker is forecasting revenue of US$8,245 million for the 12 months. This will be down 11% from US$9,269 million in FY 2022.
Due to higher costs, Goldman is expecting South32 to report an underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) margin of 29% for the year. This is down from 47% a year earlier.
The broker expects this to result in the company posting underlying EBITDA of US$2,533 million in FY 2023, which equates to a 46.7% decline year on year.
What about dividends?
Unfortunately, Goldman expects South32's profit decline to weigh on its dividend payments in FY 2023.
The broker has pencilled in a full-year dividend of 8.4 US cents (13.1 Australian cents) per share. This implies a 40% payout ratio and equates to a 3.55% dividend yield based on where South32 shares are currently trading.
As a comparison, in FY 2022 the company paid a mammoth 25.7 US cents per share dividend.
Are South32 shares a buy?
In light of the above, Goldman Sachs isn't overly positive on South32 shares at this point.
The broker currently has a neutral rating and a $3.70 price target. This is broadly in line with where its shares are now trading. It commented:
Fairly valued vs peers: Trading at ~1xNAV (A$3.75/sh) vs. peers BHP/RIO at 0.95x/0.85x NAV and on NTM EV/EBITDA multiple of 4.3x vs. the sector average of ~4.5x and on TSR of 0% vs RIO and BHP on 16% and 7%.
