Tag: ASX:BHP

The 1QFY17 production result for BHP was weaker than the market had expected. Weather related issues were mainly the cause.

BHP maintained FY17 shipping guidance for Iron Ore at 265-275mt. Petroleum volumes are anticipated to improve in the year ahead following recent issues with weak production from the Gulf of Mexico assets and lower shale volumes.

Forecast FY17 revenue to be in the range of $35b, EBIT of $7b, DPS of $0.50, which places the stock on a forward yield of 3%.

Many analysts have a bearish outlook for commodity prices in Fy18 and as a consequence, lower forecast EPS and DPS for the majors. Our view differs slightly and we think any pullback early next year will most likely create a solid “buy on the dip” opportunity for both BHP and RIO.

Our algorithm engines will track these and other major resource names for potential entry conditions.

BHP.ASX

In summary, BHP posted a solid result with both NPAT and EBIT beating consensus. With the final dividend coming in at US14cps, FY16 total dividends of US30cps, the total dividends for the year are below expectations.  In FY17 we remain hopeful we’ve seen the bottom of the cycle for BHP earnings.

If you don’t review the graph of iron ore very often, you may appreciate the images below.

12 month close $56

20-year history.

BHP.ASX announced FY16 EBITDA $12b and underlying EBIT $3.5b. There was over $7b in impairments and management’s cost out performance in Copper, Coal and Petroleum will help to improve BHP’s earnings and cash flow into FY17 and FY18.

On forward basis we have BHP in FY17 paying out $0.35 DPS, placing the stock on a 2.2% yield.

No signal present: We currently hold BHP in the model and have sold Nov $22.50 calls to enhance the return.

Rally in Resources

As discussed in the July video market update report, I forecast that money was in the early stages of rotating back towards the banks and resources. We’re now seeing this reflected in strong momentum within BHP and  RIO. It’s likely that this trend will help lift the energy names as well.