Fortescue Ltd (ASX: FMG) shares have seen plenty of volatility over the last few years, and the next few years remain uncertain. The ASX mining share makes virtually all of its revenue from iron ore, so the commodity price and production volumes are key.
The miner recently released its quarterly production report for the three months ended 31 March, so analysts have updated their views on the company's profit potential.
Let's have a look at what profit Fortescue could generate in the next few years, which could then influence the Fortescue share price.
FY24 projection
The 2024 financial year is almost done, so we already know quite a lot about it.
The broker UBS has forecast that Fortescue could generate US$18.5 billion in revenue and achieve US$6.2 billion in net profit after tax (NPAT) for FY24. These numbers would put the Fortescue share price at under 13x FY24's estimated earnings.
This could enable it to pay an annual dividend of A$1.67, translating into a grossed-up dividend yield of 9.3%. Not a bad start to the projections.
How about FY25?
UBS has forecast the iron ore price to reach around US$113 per tonne in the 2024 calendar year, which covers the first half of FY25.
The broker is focusing on a couple of other catalysts. Fortescue's high-grade Iron Bridge project is facing a water-constrained ramp-up to 22mt per annum, with the guidance for that still being the quarter ending September 2025. However, UBS sees a risk with that.
The broker suggests Fortescue could generate revenue of US$17.2 billion of revenue and US$5.28 billion of NPAT. This would mean the Fortescue share price is valued at 15x FY25's estimated earnings with a possible grossed-up dividend yield of 7.1%.
And FY26?
The further away the forecast is, the more likely that a prediction will change as a result of unexpected future impacts and macroeconomic events.
UBS suggests the iron ore share could generate revenue of US$15.8 billion in FY26 and NPAT of $4.06 billion. If it does, Fortescue shares are trading at 19x FY26's estimated earnings, with a grossed-up dividend yield of 5.3%.
Expectations for FY27
Fortescue's revenue and profit generation are expected to fall further in FY27 amid increasing iron ore supply from existing and new markets (such as Africa).
UBS projects the company to make revenue of US$15.4 billion in FY27 and US$3.6 billion of NPAT. UBS' predictions mean the Fortescue share price is valued at 22x FY27's estimated earnings, and it could pay a grossed-up dividend yield of 4.5%.
Finally, here's the FY28 forecast
The final financial year of this series of UBS projections actually suggests an increase in profitability. That'll be when Fortescue could be producing a noticeable amount of green hydrogen and green ammonia, depending on how quickly its projects progress.
UBS suggests Fortescue could make an NPAT of $3.9 billion in FY28, which puts the Fortescue share price at 20x FY28's estimated earnings. The Fortescue grossed-up dividend yield could be 4.8%.
