BHP Group Ltd (ASX: BHP) shares will be on watch this week.
That's because the mining giant is scheduled to release its fourth quarter update on Wednesday 17 July.
Ahead of the release of its update, let's have a look at what the market is expecting from the Big Australian.
BHP Q4 preview
According to a note out of Goldman Sachs, it is expecting BHP to fall a touch short of the market's expectations during the fourth quarter.
It is forecasting iron ore shipments of 74.1Mt for the three months. While this is up 6% quarter on quarter, it is lower than the consensus estimate of 74.9Mt. Goldman expects this to be achieved with a realised iron ore price of US$101 per tonne.
It is a similar story for copper, with the broker forecasting flat copper production of 467kt, which is just short of the consensus estimate of 470kt. A realised price of US$3.93 per pound is expected by Goldman, which is 12 cents lower than the consensus estimate of US$4.05 per tonne.
Metallurgical coal production could disappoint. It is expected to be down 24% quarter on quarter to 4.6Mt. This is lower than the consensus estimate of 4.9Mt.
Finally, nickel production is also forecast to come in lower than the market expects. Goldman has pencilled in production of 18.6kt versus the consensus estimate of 19.8kt.
BHP is also likely to provide the market with its guidance for FY 2025. And once again, the broker believes this could be lower than expectations. It commented:
BHP: we sit below on FY25 iron ore production vs. VA consensus; Pilbara iron ore 287Mt (100% basis) vs. VA cons at 293Mt and Qld met coal production of 18Mt (BHP share) vs. VA cons at 21Mt due to our view of ongoing catch-up on waste stripping and build-up of in-pit coal inventory.
Should you buy BHP shares?
Despite expecting BHP to fall short of the market's expectations in both the fourth quarter and FY 2025, Goldman remains very positive on the miner's shares.
It currently has a buy rating and $48.40 price target on its shares. Based on its current share price of $43.40, this implies potential upside of 11.5% for investors over the next 12 months.
Goldman also expects a 4.2% dividend yield in FY 2025, which boosts the total potential return to almost 16%.
Commenting on its bullish view, the broker said:
We rate BHP a Buy based on: (1) Attractive valuation, but at a premium to RIO: Although we believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers), (2) Robust FCF, but still below RIO, (3) We remain bullish on copper and met coal, (4) Optionality with +US$20bn copper pipeline, but growth below RIO.
