On Wednesday, Citigroup adjusted its target price for BHP Billiton (NYSE:) Ltd. (BHP:AU) (NYSE:BHP), slightly lowering it to 47.50 Australian dollars from the previous 48.50 Australian dollars. Despite the change, the company maintains a buy rating on the stock. The revision comes after BHP reported strong production figures for the June quarter, which beat expectations across all key Citi divisions.
BHP’s cost guidance range for fiscal 2024 remains unchanged, although the company expects costs at the Spence and WAIO businesses to trend towards the upper half of the range. Production guidance for FY25 points to a stable outlook, with rising production, stable iron ore production and falling coal production.
The company also reported capital expenditures of approximately $9.3 billion in fiscal 2024, down from initial guidance of approximately $10 billion. As a result, FY24 and FY25 EBITDA forecasts have been revised down by 3% and 7% respectively due to slight increases in operating expenses and nickel costs.
In addition, BHP has cut its dividend payout ratio to 52% and expects dividends to decrease by 9% and 16% in FY24 and FY25 respectively. Taking into account current spot exchange rates, the discounted cash flow (DCF) valuation fell 4% to A$42.6.
Citi’s stance on BHP remains positive, especially since their copper price forecast for calendar year 2025 is $12,000 per ton. This price point puts BHP’s EBITDA (EV/EBITDA) estimated enterprise value multiple at approximately 5.3x in FY2025 and FY2025.
In other recent news, BHP Group (NYSE: BHP Group) has made several significant developments. With the Nickel West project on hold, Barclays cut its price target on the company, citing higher than expected care and maintenance costs. The company also revised BHP’s profit forecast, expecting EBITDA to fall in fiscal 2025 and 2026.
Citi has reinstated coverage of BHP, issuing a bullish rating and highlighting potential areas for growth, including expanding its Chilean copper business.
BHP Billiton also announced the suspension of its Nickel West operations and West Musgrave project due to sharp falls in metal prices and a global nickel glut. The company has committed about $300 million annually to prepare for a possible resumption of operations.
On the other hand, progress at the Woodsmiths fertilizer project in North Yorkshire has been slowed as Anglo American successfully fended off a takeover bid from BHP Billiton due to concerns in South Africa. These latest developments reflect continued developments in the mining industry and the strategic responses of companies such as BHP Group and Anglo American.
Investment Professional Insights
The latest data from InvestingPro supports Citi’s positive outlook on BHP Billiton Ltd (BHP: AU) (NYSE: BHP ), highlighting several key financial metrics and market insights. In the past 12 months to the second quarter of 2024, BHP Billiton’s market capitalization reached US$146.35 billion, its gross profit margin was as high as 78.46%, and its financial position appears to be stable. Additionally, the company offers an attractive dividend yield of 4.98%, which is great for income-seeking investors.
BHP Billiton’s InvestingPro Tips show that the company’s valuation implies strong free cash flow yields and it has maintained a dividend for 45 consecutive years, delivering reliable returns to shareholders. Additionally, BHP is trading near its 52-week low, which could provide investors with a potential entry point given the stock’s low price volatility and analyst forecasts for profitability this year.
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