What is the outlook for South32 shares in 2024?

Is there light at the end of the tunnel for this mining stock?

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South32 Ltd (ASX: S32) shares have had a rotten 2023. The stock price is down 20% in the year to date and it has fallen 35% from the peak in January 2023. With another year almost over, how is the outlook building for 2024?

As a reminder, South32 is one of the larger ASX mining shares around. It has a market capitalisation of $14 billion according to the ASX.

It's involved with a number of commodities including alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese.

How does 2024 look for the ASX mining share?

After seeing the update for the three months to September 2023, the broker UBS said the quarter was "soft" but in line with the FY24 guidance, reflecting "planned maintenance across the portfolio."

UBS noted the ASX mining share has initiated a "group-wide cost review given weaker commodity prices, with Cerro Matoso", and additional capital expenditure is also in focus.

The broker also said the project focus remains with "Sierra Gorda and Hermosa studies" due in the FY24 second half, which could be catalysts.

UBS also said the share buyback could be a catalyst. At the end of the three months to September 2023, South32 said its capital management program is "95% complete with US$112 million remaining to be returned ahead of its extension or expiry on 1 March 2024."

The investment bank points out South32 has a dividend policy that sees a minimum of 40% of its earnings paid out annually and that it has a "strong balance sheet".

Forecasts for South32 shares

UBS is forecasting that South32's earnings before interest and tax (EBIT), net profit after tax (NPAT) and dividend per share will all reduce in FY24. The earnings per share (EPS) could decline to US 17 cents in FY24, but then rise to US 28 cents per share in FY25, which could take the forecast dividend from US 7 cents in FY24 to US 11 cents in FY25.

The broker is positive on the company, with a buy rating and a price target of $4. While that's only a forecast of where the South32 share price might go next year, it implies a possible rise of 28%.

Time will tell if UBS is right with its predictions – for now, the market is seeming quite negative.

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 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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