The most important factor for Fortescue Ltd (ASX: FMG) shares in the next few years may be how much earnings the company generates.
Investors usually focus on a business' profit, which can influence the earnings multiple people are willing to pay.
Many miners decide on their passive income payments based on a percentage of the profit generated, which is called the dividend payout ratio. So, a rising or falling net profit can support or push down the dividend.
Fortescue is one of the world's largest iron-focused miners, so changes in the iron ore price could significantly influence the ASX iron ore share.
The Fortescue share price appears to be benefiting from the recent announcement of the Chinese economic stimulus being launched to help the real estate sector, the banking sector, and households with mortgages. This has helped the iron ore price soar in the last couple of weeks from around US$90 per tonne to approximately US$110 per tonne.
Let's look at what the earnings forecast for Fortescue shares looks like.
First, FY25
After analysing the Chinese economic stimulus announced in September, UBS suggested in a note that the support offers "short-term relief".
But, according to UBS chief China economist Tao Wang and head of China property research John Lam, "more is needed to appropriately stabilise property market activity and house prices, thereby supporting consumer confidence and ultimately consumption."
UBS suggests that weak property activity and stable infrastructure fixed asset investment (FAI) are weighing on construction, which is a key Chinese sector in terms of steel (and therefore iron) demand.
If there is further stimulus in China, UBS would "highlight potential upside risk" (meaning a better chance of positive returns) compared to its current "cautious views" on what it called higher-risk iron ore plays such as Fortescue shares.
For now, UBS has a sell rating on Fortescue shares with a price target of $17.30.
The broker is expecting Fortescue's FY25 revenue to drop to $15.8 billion, and net profit could decline to approximately $3.8 billion.
In FY25, UBS will be monitoring the ramp-up of the new Iron Bridge project and hopes for concrete studies to show the transparency of green hydrogen project economics.
UBS said the "fundamentals remain weak but no longer appear to be deteriorating."
Then, FY26
Based on the broker's projections, Fortescue could see another financial decline in the 2026 financial year.
UBS is forecasting revenue could decline slightly to US$15.6 billion in FY26, and the net profit could drop $267 million to $3.5 billion.
Next, FY27
The worst financial year for this series of projections is expected to be the 2027 financial year.
UBS is suggesting the iron ore miner's revenue could decrease to US$15.2 billion and the net profit may drop $437 million to $3.08 billion.
The broker is concerned about a weaker iron ore price combining with increased sustaining, decarbonisation and energy capital expenditure.
In this weak-earning year, it could see the Fortescue annual dividend per share drop to just 68 cents.
After that, FY28
With some capital spending coming to fruition by the 2028 financial year, UBS is expecting a sizeable increase in profit in FY28.
The broker is predicting the revenue will be virtually flat at $15.25 billion, but the net profit could jump by $512 million to $3.6 billion.
Finally, FY29
Although the 2029 financial year is a long way off, it's forecast to be the best year in this series of projections.
UBS is predicting the iron ore miner's revenue to rise to US$15.8 billion in FY29 and its net profit to increase by $324 million to $3.9 billion. At this stage, it could produce a material amount of green hydrogen.
The annual dividend per share could recover to 85 cents per share in FY29 from that FY27 low.
