BHP share price: 3 things to consider ahead of FY20 results

When will the miner report its FY20 results?

Diversified mining giant BHP Group (BHP) is set to hand down its full-year (FY20) results this Wednesday, 19 August.

BHP share price: What analysts are currently saying

With iron ore futures trading confidently above US$100 per tonne, analysts have continued to view BHP Group favourably – assigning the mining giant an Overweight rating, on average, according to the Wall Street Journal. More specifically, BHP has 8 Buy ratings, 6 Hold ratings and 1 Underweight rating, also according to the Wall Street Journal.

On a more granular level, analysts from Macquarie Wealth Management – who have been bullish on the iron ore market for some time now – recently pointed out that:

‘We remain positive on stocks with iron-ore exposure due to strong cash flow yields and earnings upgrade momentum. FMG is our preferred large cap exposure, and we remain positive on both RIO and BHP.’

Elaborating on such a position, Macquarie analysts said that with spot iron ore prices trading above US$100 per tonne for over two months:

‘Iron-ore miners are generating significant cash flow at spot prices. Free cash flow yields are ~15% for most of our iron-ore coverage in FY21 and FY22.’

Importantly, though Macquarie’s preferred iron ore miner remains Fortescue Metals Group, the investment bank still has an Outperform rating and $39.00 price target on BHP Group.

At the time of writing, BHP traded a shade over $40 per share.

What the market knows and doesn’t know

With BHP already providing investors with its full-year production figures in July, the market has modest visibility on what the mining giant’s full-year results will likely contain.

Looking at some of the key figures from this production release, in FY20 the Group reported full-year petroleum production of 109 million barrels of oil equivalent (-10%), copper production of 1,724 kilotonnes (+2%), and iron ore production of 248 million tonnes (+4%).

Moreover, based on BHP’s interim results and elevated iron ore prices, one assumes that the iron ore segment will continue to the be the Group’s primary profitability driver in the full-year, with BHP reporting for the half ending 31 December 2019 that iron ore made up 60% of Group earnings (EBITDA), copper 20%, metallurgical coal 9% and petroleum 13%.

Speaking of those results, BHP’s CEO Mike Henry said:

'Our diversified portfolio and high quality assets, together with our strong balance sheet, make us resilient to the ongoing uncertainty in the markets for our commodities. We expect to continue to generate solid cash flow through the cycle and we remain confident in the outlook for demand for our products over the medium to long-term.'

Finally, investors are likely eagerly awaiting BHP’s final dividend announcement, as well as further clarity on its FY21 capital and exploration expenditure guidance, which the Group said would be provided at the FY20 results.

For reference, BHP’s FY19 full-year dividend totalled 235 US cents per share. So far in fiscal 2020 the Group has paid out 65 US cents per share in dividends to investors. BHP – the ASX-listed entity – will trade ex-dividend on 3 September.

Technical analysis: BHP Group (LSE)

The share price of BHP Group (LSE) continues to trade in an upward channel and trend which began off the March lows this year. While the trend is up, the stochastic is giving a short-term overbought indication. Trend is considered to take preference over the overbought signal, however using these signals in conjunction with each other, the optimal scenario would be for traders to look for long entry into any short term weakness (should it occur). Trend line support at around 1715, might be considered the preferred level to look for this long entry, while a move below the low at 1650, would instead suggest the failure of the bullish assumptions.

Alternatively, breakout out traders might look for long entry on a close above 1850, to target further gains towards channel resistance currently considered at around the 1960 level.

How to trade BHP, long or short

Are you bullish or bearish on BHP heading into its full-year earnings? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) BHP using CFDs, follow these easy steps:

1. Create an IG Trading Account or log in to your existing account
2. Enter ‘BHP’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade