BHP share price: 3 things you should know ahead of FY19 earnings

BHP, the global mining and metals company, is set to report its 2019 full-year results next Tuesday, August 20.

With BHP Billiton Ltd set to release its 2019 full-year results on Tuesday, August 20, here are 3 key things every investor should know about the mining and metals giant.

Growth and iron ore prices weaker

BHP – like Rio Tinto Ltd and Fortescue Metals Group Ltd – has seen its share price fall heavily in the last couple of months as the iron ore outlook sours.

Tellingly, iron ore prices have fallen from a high of $117 per tonne in late July, to $93 per tonne today.

If this weakening commodity outlook was problematic, escalating US-China trade tensions took things a step further, as equities have faced a volatile month and concerns over growth and the global industrial outlook intensify.

In response to these factors, BHP’s share price has fallen around 10%. Prior to the Australian markets opening on Friday, BHP traded for A$36.39 per share.

Ultimately, given that iron ore contributes a significant 41% to BHP Group's earnings (EBITDA), it will be intriguing to see how the weakened iron ore outlook will impact (if at all) BHP’s 2019 results and its 2020 guidance.

BHP share price: instability no surprise

BHP’s management is under no illusions about the headwinds facing the company.

Indeed, in BHP’s first half results presentation the company pointed out that short-term risks ranged from moderating growth, policy uncertainty and mixed sentiment.

Long-term however, BHP – which is already proactive in its climate change initiatives, sees strong potential. Here ‘growth in population wealth’ and ‘decarbonisation and electrification’ both rank as key positives for the mining behemoth.

Weighing the long and short-term outlook, analysts seem mixed on the global miner. According to the Wall Street Journal, of the 17 analysts covering the stock, the overall analyst consensus is a hold.

Fundamentals remain strong

Though broader forces have impacted BHP Billiton Ltd's share price in recent times, the company posted impressive top and bottom-line figures in the first-half of 2019 – underscoring its strong management and dominance on the world stage.

Specifically, the company reported revenues of $20.7 billion and underlying earnings (EBITDA) of $10.5 billion in the first-half.

Though vital figures, for income-focused investors, the fact that BHP continues to be focused on building shareholder wealth, paying out $2.5 billion in dividends in the 1H19, is likely to rank as a key importance.

These strong dividends came in addition to $5.2 billion worth of share buy backs pursued by BHP in the first-half.

Finally, the company continues to take a disciplined approach to paying down its net debt. In the first-half of 2019 BHP reported net debt of $9.9 billion, down a sizable $1.0 billion from June 2018.

Investors – in the ever-increasingly difficult search for yield – will likely be keen to see BHP continue its focus on strong dividends and aggressive buy backs when the company reports its full-year results next week, on August 20.

Year-to-date, and even as macroeconomic volatility persists, BHP Billiton Ltd has seen its share price rise some 8%.


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