BHP Group Ltd (ASX: BHP) shares will be closely watched next week.
That's because the mining giant is releasing its full year results on Tuesday 27 August.
Ahead of the release, let's take a look at what the market is expecting from the Big Australian.
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FY 2024 results preview
According to consensus estimates compiled by the miner, the market is expecting BHP to report total revenue of US$55,807 million in FY 2024.
As for earnings, the consensus estimate is for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of US$28,835 million, which is up from US$27,956 million in FY 2023. This comprises the following:
- Copper EBITDA of US$8,085 million
- Iron ore EBITDA of US$18,842 million
- Coal EBITDA of US$2,226 million
- Group and unallocated EBITDA of -US$638 million
This is then expected to lead to underlying EBIT of US$23,339 million and net profit of US$13,523 million in FY 2024.
In respect to cash, the consensus estimate is for operating cash flow of US$19,501 million, which is expected to underpin the payment of a US$1.46 per share fully franked dividend. This equates to A$2.17 per share in local currency and equates to a 5.3% dividend yield based on where BHP shares currently trade.
Should you buy BHP shares?
Analysts at Goldman Sachs are feeling positive about the miner ahead of its results release.
They currently have a buy rating and $48.40 price target on its shares. This implies potential upside of almost 18% for investors over the next 12 months. In addition, the broker is forecasting dividend yields of approximately 4.5% in FY 2025 and 4.4% in FY 2026.
So, if you include the expected dividends over the period, the total potential return stretches to over 22%. To put that into context, a $10,000 investment would be worth $12,200 in 12 months if Goldman Sachs is on the money with its recommendation.
Commenting on its bullish view, the broker said:
Attractive valuation, but at a premium to RIO: BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8x NAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. 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).
All in all, this could make BHP shares worth considering if you're looking for exposure to the mining sector.
