What to Expect From BHP, Rio Tinto and Fortescue's Upcoming Earnings Reports

Moomoo News AU wrote a column · Feb 19, 2024 10:42

Investor anticipation is mounting as Australia's iron ore giants— $BHP Group Ltd (BHP.AU)$, $Rio Tinto Ltd (RIO.AU)$, and $Fortescue Ltd (FMG.AU)$—are poised to unveil their earnings within the next few days. Backed by strong iron ore market performance in the first half, the stage is set for potentially robust earnings reports from these ASX heavyweights.

BHP

Bloomberg's consensus has set BHP's revenue expectations at A$42.63 (US$27.67) billion and EPS at A$2.01 (US$1.3) for the half year. While BHP has faced a challenging period in metallurgical coal with significant production drops and escalating costs, a US$15.16 billion EBITDA is still deemed attainable.

What to Expect From BHP, Rio Tinto and Fortescue's Upcoming Earnings Reports

Although BHP's versatility in the face of various operational challenges is acknowledged, the company has recently been confronted with notable financial headwinds. Last week, BHP disclosed two exceptional items that will impact its FY24 half-year results:

● An impairment charge of around US$2.5 billion after tax on Western Australia Nickel, bringing the net operating assets value down to a negative US$300 million and an expected negative EBITDA of US$200 million for the first half.

● A provision of US$3.2 billion post-tax for the Samarco dam failure, with total provisions reaching US$6.5 billion as of December 31, 2023.

Morgan Stanley retains a neutral perspective on BHP, citing risks associated with these provisions and a preference for Rio Tinto, which shows better growth and dividend prospects.

Rio Tinto

Rio Tinto is expected to report a robust A$83.11 (US$53.66) billion in full-year revenue and A$11.19 (US$7.22) EPS. Despite potential easing from seasonal highs, Bloomberg Intelligence suggests that iron ore prices could stabilize above expectations, presenting a positive scenario for Rio Tinto.

The company's production is on an upward trajectory, with clear plans to exceed 345 million tons in midterm Pilbara production, positioning it for growth. However, this focus on expansion may limit dividend increases, yet the market has not fully factored in Rio's long-term growth opportunities, especially as it trades at a discount compared to BHP.

Fortescue

Analysts project Fortescue's half-year revenue at A$14.99 (US$9.77) billion with an EPS of A$1.52 (US$1). Despite a 2% reduction in iron ore shipments for the six months, the company expects improved revenue and earnings, propelled by higher iron ore prices towards the end of 2023.

Since September of the previous year, Fortescue's shares have surged by 40%, outpacing the gains of Rio Tinto and BHP, which rose by 14% and 6% respectively, and significantly outperforming the $S&P/ASX 200 (.XJO.AU)$'s increase of 5%. However, with the stock trading near its historical peak, analysts are skeptical about finding significant factors that could further elevate its valuation over the next year. Consequently, they have given Fortescue an underperform or sell rating, signaling a cautious approach moving forward.

Dividend Prospects for Mining Giants

The trio of ASX mining titans have a history of rewarding shareholders with substantial dividends:

● Fortescue's promising results could lead to an interim dividend increase to 80 Australian cents per share.

● Rio Tinto may announce a final dividend of 3.52 Australian dollars per share.

● Contrarily, BHP may see a reduced interim dividend of 80 Australian cents per share due to heightened capex and net debt levels.

Looking ahead, market analysts predict Fortescue will offer a 6.51% dividend yield over the next twelve months, outperforming Rio Tinto's expected 4.68% yield and BHP's projected 5.2% yield.

Source: Bloomberg, Market Index, AFR

Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more

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