BHP shares fall after disappointing first-half earnings miss

The mining giant failed to deliver the goods during the half.

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BHP Group Ltd (ASX: BHP) shares are trading lower in morning trade.

At the time of writing, the mining giant's shares are down 1% to $45.58.

Why are BHP shares falling?

Investors have been hitting the sell button today after the Big Australian's half-year results fell a touch short of expectations.

In case you missed it, the mining giant reported a 6% increase in revenue to US$27.2 billion but a sizeable 86% decline in profit after tax to US$927 million. The latter was driven by US$5.6 billion of exceptional items relating to the impairment of Western Australia Nickel and charges from the Samarco dam failure.

Excluding these exceptional items, the miner's underlying profit was flat on the prior corresponding period at US$6.6 billion. This equates to 129.6 US cents on a per share basis.

Despite its flat underlying earnings, the BHP board was forced to cut its fully franked interim dividend by 20% to 72 US cents per share. This equates to $1.10 in local currency.

Expectations missed

Goldman Sachs was expecting revenue of US$27.6 billion for the first half. This means that the company was approximately 1.5% short on the top line.

It was much worser for earnings per share, with the market pencilling in half-year earnings of US$1.43 per share. This means a miss of 9.4% on that metric.

One small positive is that its dividend payout ratio of 56% came in ahead of what analysts at Morgans were expecting. Prior to the result, the broker said:

Moderating dividend. We expect a lower dividend payout ratio of 55% in the first half, which would be the lowest level of earnings paid out since 2018. We base this assumption on rising investment (capex +60% yoy) and net debt (US$12.5 – $13.0bn vs target range of US$5 – $15bn).

Overall, not the strongest result from BHP and it isn't overly surprising to see its shares fall today.

Commenting on the result, Saxo Asia Pacific Senior Sales Trader Junvum Kim said:

BHP's first-half underlying profit of USD 6.6 billion was little changed year on year, supported by high iron ore and copper prices. However, the interim dividend of USD 0.72 is the lowest since 2020, as the company battles lagged inflationary pressures on labour and unit costs, which offset the FY24 sales growth outlook of 10%.

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. 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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