On Wednesday, Citi adjusted its price target for BHP Billiton (NYSE:BBL) Ltd. (BHP:AU) (NYSE: BHP), reducing it slightly to AUD47.50 from the previous AUD48.50. Despite this change, the firm maintained its Buy rating on the stock. The adjustment followed BHP's report of strong production numbers for the June quarter, which surpassed Citi's expectations in all key divisions.
BHP's FY24 cost guidance ranges remain the same, although the company anticipates costs to trend toward the upper half of the range for its Spence and WAIO operations. The production guidance for FY25 suggests a stable outlook with an increase in copper production, steady iron ore output, and a decrease in coal production.
The company has also reported that its capital expenditure for FY24 will be around $9.3 billion, which is lower than the initially guided figure of approximately $10 billion. Consequently, EBITDA estimates for FY24 and FY25 have been revised downward by 3% and 7% respectively, due to slightly higher operating expenses and nickel costs.
Additionally, BHP has scaled back its dividend payout ratio to 52%, resulting in an anticipated reduction in dividends of 9% and 16% for FY24 and FY25 respectively. The discounted cash flow (DCF) valuation has decreased by 4% to A$42.6, factoring in the current spot foreign exchange rates.
Citi's stance on BHP remains positive, particularly due to their copper price forecast of US$12,000 per ton for the calendar year 2025. This price point positions BHP with an estimated enterprise value to EBITDA (EV/EBITDA) multiple of around 5.3 times for FY25 and FY26, supporting the firm's Buy rating despite the lowered price target.
In other recent news, BHP Group (NYSE:BHP) has seen several significant developments. Barclays has downgraded the company's shares target due to the suspension of its Nickel West project, citing higher than anticipated care and maintenance costs. The firm also revised its earnings projections for BHP, expecting a decrease in EBITDA for fiscal years 2025 and 2026.
Citi has resumed coverage on BHP, issuing a bullish rating and highlighting potential growth areas, including expanding its Chilean copper operations.
BHP has also announced a halt to its Nickel West operations and West Musgrave project due to a significant drop in metal prices and a global surplus of nickel. The company has committed approximately $300 million annually towards maintaining readiness for the potential resumption of operations.
On the other hand, Anglo American (JO:AGLJ) has successfully fended off BHP's takeover bid amid concerns in South Africa, leading to a slowdown of the Woodsmith fertilizer project in North Yorkshire. These recent developments reflect the ongoing evolution of the mining industry and strategic responses from companies like BHP Group and Anglo American.
InvestingPro Insights
Recent data from InvestingPro supports Citi's positive outlook on BHP Billiton Ltd. (BHP:AU) (NYSE: BHP), highlighting several key financial metrics and market insights. With a strong market capitalization of $146.35 billion USD and a robust gross profit margin of 78.46% for the last twelve months as of Q2 2024, BHP's financial health appears stable. Furthermore, the company's dividend yield stands at an attractive 4.98%, which is significant for investors seeking income.
InvestingPro Tips for BHP reveal that the company's valuation implies a strong free cash flow yield and it has maintained dividend payments for 45 consecutive years, showcasing a reliable return to shareholders. Additionally, BHP is trading near its 52-week low, which might present a potential entry point for investors considering the stock's low price volatility and the analysts' prediction of profitability for the year.
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