Two of the most popular options in the resources sector are Fortescue Ltd (ASX: FMG) and Woodside Energy Group Ltd (ASX: WDS) shares.
These two giants feature in countless portfolios across Australia and internationally.
But are they in the buy zone right now? Let's see what analysts at Morgans are saying about the two large-cap resources shares.
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Fortescue shares
The team at Morgans was pleased with Fortescue's performance during the first half of FY 2026.
This was particularly the case for the hematite business, which it notes delivered a 5% beat to its operating earnings estimate. However, it concedes that these earnings are then being spent on activities that currently generate zero returns, which is compressing its free cash flow conversion.
In light of this, the broker has seen enough value to upgrade Fortescue's shares, but only to a hold rating with a price target of $20.60. This is just a touch below where the iron ore miner's shares are trading at the time of writing.
Commenting on the company, Morgans said:
The hematite business delivered a 5% EBITDA beat; the problem is what happens to the cash after that. A strong hematite result, but 43% of group capex is directed to activities generating zero current earnings, compressing FCF conversion to 48% and ROCE to 19%. NPAT miss reflects rising capital intensity, with a sharp rise in D&A. Dividend solid at A$0.62/share. Post recent pullback we upgrade to HOLD.
Woodside shares
Morgans is much more positive on Woodside and sees value in its shares at current levels.
The broker felt that the energy producer delivered a full-year result that was strong, highlighting that both its net profit after tax and dividend were ahead of consensus estimates.
In addition, it was pleased to see the company outperform on operating expenses and debt levels.
So, with oil prices recovering and management delivering on project developments, the broker thinks investors should buy Woodside shares today.
It has retained its buy rating with an increased price target of $30.50 (from $29.80). Based on its current share price of $27.96, this implies potential upside of 9.1% for investors over the next 12 months. It also expects a 5.1% dividend yield in FY 2026, bringing the total potential return beyond 14%.
Commenting on Woodside, the broker said:
A strong CY25 result, coming in ahead of consensus on both NPAT and dividend. Yet another half where WDS outperforms on opex and net debt balance. We see a clear case for value upside remaining in WDS, from a recovering oil price, solid project delivery and FCF harvest as projects come on (CY27-29). We retain our BUY rating, with an upgraded A$30.50 (was A$29.80).
