Next week could be a big one for BHP Group Ltd (ASX: BHP) shares.
That's because the mining giant is scheduled to release its highly anticipated second quarter update on 21 January.
Ahead of the release of the update, let's see what the market is expecting from the Big Australian.
Q2 preview
According to a note out of Goldman Sachs, its analysts are expecting a bit of a mixed quarter.
For example, copper production (100% basis) is expected to fall 2.5% quarter on quarter to 468kt with a largely steady average realised price of US$4.20 per pound. Whereas the consensus estimate is for flat production of 480kt for the three months.
Iron ore Pilbara shipments (100% basis) are forecast to increase 3.5% quarter on quarter to 74Mt. This is ahead of the consensus estimate for a smaller 2% increase to 72.9Mt.
Goldman believes that these shipments will have averaged a realised iron ore price of US$87 per tonne. This would be up 8.75% on the US$80 per tonne it recorded in the prior quarter.
Finally, met coal production is forecast to come in at 4.4Mt for the quarter. This is in line with the consensus estimate but would be a 2.2% decline on first quarter met coal production.
A average realised met coal price of US$203 per tonne is expected by Goldman, which is down 5.6% from the first quarter.
Finally, at the end of the quarter, Goldman believes that BHP will have a net debt position of US$10.7 billion. This is down from US$12.6 billion a year earlier but ahead of the consensus estimate of US$10.3 billion.
Should you buy BHP shares?
Goldman Sachs is seeing a lot of value on offer in the mining sector following a disappointing 12 months.
As a result, BHP shares are just one of a large number that the broker is recommending as buys right now. It said:
The Australian mining sector enters 2025 trading on ~5.0x NTM EV/EBITDA, ~0.8x NAV and a FCF yield of ~5% (market cap weighted averages), a premium (see Exhibit 1) to the major diversified miners (RIO, BHP & S32). We remain Buy rated on RIO, BHP, S32, CRN, WHC, CIA, DRR, ILU, BSL and Sell rated on FMG & NHC. We prefer companies trading at a discount to NAV and with either strong FCF or high production and earnings growth.
Goldman has a buy rating and $47.50 price target on BHP's shares. This implies potential upside of approximately 19% for investors over the next 12 months.
In addition, a 4.4% dividend yield is expected. This boosts the total potential return beyond 23%.
