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BHP and FMG share prices: first-half results preview

We examine some of BHP and FMG's key fundamentals before both companies report their first-half results next week.

BHP and FMG share prices in focus Source: Bloomberg

When will BHP and FMG report their H1 results?

Representing two of Australia’s largest mining companies: BHP Group (ASX: BHP) and Fortescue Metals Group (ASX: FMG) are expected to report their half-yearly results next week.

BHP – the more diversified of the two miners is expected to report its half-year results on 18 February.

FMG on the other hand, is set to report its H1 results on 19 February.

BHP & FMG share prices: fundamentals in focus

Though BHP and FMG’s fundamentals are expected to head in different directions for the full-year – both companies have seen their share prices appreciate off the back of rising commodity prices in 2019 and into 2020.

First looking at the fundamentals of BHP, we see that in FY19 the miner reported revenues of US$44,288 million, against earnings (EBITDA) of US$23,682 million.

Analysts are expecting much the same from the company in FY20 – with next week’s earnings likely to provide a useful ‘visibility check’ for analysts and investors alike.

According to Bloomberg Data, for the full year analysts are on average expecting BHP to record FY20 revenues of US$44,421.1 million, against earnings (EBITDA) of US$23,672.6 million.

Moreover, though BHP has benefited immensely from the run-up in iron ore prices over the last year – with 48% of its earnings (EBITDA) being derived from its iron ore operations in H2 FY19 – it is maybe Fortescue (ASX: FMG) that has benefited the most.

In the last year, the FMG share price has risen a significant 74%. At its peak in February it was up as much as 98%.

Ultimately, Fortescue derives 100% of its earnings from iron ore – leaving it the most exposed of the two companies – to both upside and downside swings from the price of iron ore.

Building on these strong commodity prices, FMG has seen a run-up in both top and bottom-line growth in recent times – with analysts expecting that such a trend will continue, over the next year.

In FY19, for example, FMG recorded revenues of US$9,956.0 million, against earnings (EBITDA) of US$5,998.0 million.

Favourable commodity tailwinds from FY19-FY20 are expected to see those figures come in even higher in FY20: with analysts forecasting revenues of US$11,702.6 million and earnings (EBITDA) of US$7,383.8 million, on average, and according to Bloomberg Data.

Which stock do analysts prefer?

Looking at the current analyst outlook – and likely speaking to FMG’s near-exponential share price run in the last year – BHP Group is currently the more favoured stock of the two.

As it stands, BHP has an average price target of $9.64; built on 5 buy recommendations, 12 hold recommendations and 2 sell recommendations.

By comparison, FMG has just 1 buy recommendation, 13 hold recommendations and 7 sell recommendations.

The average analyst price target of $9.64 on FMG also implies further downside for investors at current price levels, according to Bloomberg Data.

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