Are BHP shares a buy following the miner's quarterly update?

Is now the time to buy this mining giant's shares? Let's see what Goldman Sachs is saying.

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BHP Group Ltd (ASX: BHP) shares are out of form on Friday and ending the week in the red.

In morning trade, the mining giant's shares are down almost 1.5% to $44.53.

This follows a broad market selloff on Friday after bond yields widened in response to inflation concerns.

Should you buy BHP shares following this dip?

One leading broker that thinks investors should be snapping up the Big Australian's shares while they are down is Goldman Sachs.

This morning, the broker spoke positively about the miner following the release of its quarterly update on Thursday. It said:

BHP reported a slightly stronger than expected March Q with iron ore and copper production +2% vs. GSe and iron ore shipments of 69.8Mt +5% vs. GSe (but in-line with Visible Alpha Consensus Data).

Though, it does concede that its metallurgical coal was a big disappointment that somewhat overshadowed the above. It said:

However, met coal production of 6Mt was 17% below GSe due to weaker than expected performance from the large open cuts (Blackwater, Saraji and Peak Downs), and BHP has now downgraded FY24 guidance by 4-5Mt (1-2% of global seaborne supply) including the 2Q downgrade, due to wet weather, low inventories and continued high strip catch-up (to continue into CY25), and has subsequently increased cost guidance by US$7/t to US$119-125/t.

Copper beat due to strong result from Spence in Chile on higher mill throughput with guidance now expected at the upper end of the 210-250kt range (GSe 240kt).

Nevertheless, it remains positive and thinks investors should be buying the miner's shares today.

Double-digit returns

According to the note, the broker has reiterated its buy rating with a slightly trimmed price target of $49.00. This implies a potential upside of 10% for investors over the next 12 months.

And with Goldman forecasting dividend yields of 5% in FY 2024 and 4.4% in FY 2025, the total potential 12-month return stretches comfortably beyond 14%.

Goldman concludes:

Our FY24/25/26 EPS changes by 0%/0%/-2% on the operating result with stronger copper and iron ore volumes offset by lower met coal volumes from the owned assets, and after incorporating the divestment of the Daunia and Blackwater metallurgical coal mines in Qld to WHC. Our NAV is unchanged at A$49.2/sh and our 12m PT is down slightly to A$49.0/sh.

All in all, this could make BHP shares worth considering if you want to expose your investment portfolio to the mining sector.

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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