Should you buy BHP shares following its Q1 update?

What are analysts saying about this mining giant's shares?

| More on:
a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

BHP Group Ltd (ASX: BHP) shares are falling with the market on Thursday.

In afternoon trade, the mining giant's shares are down 1.5% to $45.18.

Should you buy the dip?

One leading broker that is likely to see today's pullback as a buying opportunity is Goldman Sachs.

This morning, in response to the miner's first-quarter update, the broker has reiterated its bullish view on BHP's shares.

According to the note, its analysts have retained their buy rating and $46.50 price target.

While this only implies a modest potential upside of 3%, the broker expects a 4.2% dividend yield in FY 2024 to sweeten the deal further. It commented:

BHP is currently trading at ~6.0x NTM EBITDA, (25-yr average EV/EBITDA of ~6-7x) vs. RIO on ~5.0x. BHP is trading at 1.0x NAV (A$45.4/sh), vs. RIO at ~0.9x NAV. That said, we believe this premium vs. peers can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t), high returning copper growth, and lower iron ore replacement & decarbonisation capex.

Who else is bullish on BHP shares?

Goldman isn't the only broker with the equivalent of a buy rating on the Big Australian's shares.

In response to the update, Macquarie has retained its outperform rating and $47.00 price target, which suggests an upside of 4%. It continues to forecast a fully franked ~4.5% dividend yield over the next 12 months.

Over at Morgans, its analysts are a touch more bullish and have an add rating and $50.00 price target on the miner's shares.

Combined with its expectation for a ~6% dividend yield in FY 2024, this implies a total 12-month return of almost 17%.

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 positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A woman sits with her hands covering her eyes while lifting her spectacles sitting at a computer on a desk in an office setting.
Broker Notes

Are ASX short sellers right about Core Lithium shares?

Two top brokers give their verdict on this junior ASX lithium miner.

Read more »

A smiling miner wearing a high vis vest and yellow hardhat and working for Superior Resources does the thumbs up in front of an open pit copper mine, indicating positive news for the company's share price today following a significant copper discovery
Materials Shares

Liontown shares dip as chair reiterates 'healthy margin' even at today's lithium price

Tim Goyder has reminded investors of the estimated $475 per tonne cost of lithium production at Kathleen Valley.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Materials Shares

The big money fund unafraid of Pilbara Minerals' share shorters

Will this fund’s investment recharge the ASX lithium share?

Read more »

A woman screams and holds her hands up in frustration.
Materials Shares

Why are Allkem shares down 11% in November?

This lithium miner's shares were out of form this month.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Core Lithium shares sink 8% on broker downgrade

The team at Citi thinks investors should be selling this lithium miner's shares.

Read more »

A businesswoman ponders why her boat is sinking in the ocean.
52-Week Lows

Lake Resources share price falls 7% to new 52-week low amid second strike AGM vote

Chair Stu Crow described "a year of significant progress" amid an 80% decline in the share price in 2023.

Read more »

A worried man holds his head and look at his computer.
Materials Shares

Sayona Mining shares sink to new 52-week low following AGM update

This lithium miner continues to sink deep into the red.

Read more »

A man in a hard hat and high visibility vest holds his thumb up in a gesture of confidence with heavy moving equipment in the background as on a mine site as the Chalice Mining share price rises today.
Materials Shares

Dreadnought share price jumps on 'tier 1 project' potential

This mineral exploration company could be sitting atop a tier one rare earths project.

Read more »