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BHP vs FMG share prices: FY20 results compared

We compare and contrast the full-year (FY20) results releases from BHP Group and Fortescue Metals Group.

BHP vs FMG Source: Bloomberg

BHP & FMG share prices: comparative analysis

With Australia’s corporate earnings season quickly drawing to a close – we compare and contrast the earnings results from two of the country's largest and most important mining companies: BHP Group (BHP) and Fortescue Metals Group (FMG).

From a share price perspective, FMG has far outperformed BHP over the last month, rising some 13.01% in that period, compared to just 2.43% for BHP. Year-to-date Fortescue’s outperformance becomes even more pronounced, with the pure play miner surging 71% since January. BHP by comparison has seen its share price fall 1.64% in that period.

In spite of that performance differential, analysts continued to prefer BHP over FMG, assigning the diversified miner an Overweight rating, on average, according to the Wall Street Journal. Analysts currently have a Hold rating on FMG, on average, also according to the Wall Street Journal.

FY20 results comparison

Beyond the analyst consensus, both miners have benefitted from robust iron ore prices – with the CME iron ore front-month futures contract currently trading at US$122.34 per tonne – representing a multi-year high for the commodity.

BHP FY20 Results

  • Underlying earnings (EBITDA) of US$22.1 billion, down 5%
  • Profits after tax of US$8.0 billion, down 4%
  • Full-year dividends of US 120 cents per share, down 10%
  • 64% underlying earnings derived from iron ore segment

FMG FY20 Results

  • Underlying earnings (EBITDA) of US$8.4 billion, up 38%
  • Profits after tax of US$4.7 billion, up 49%
  • Full-year dividends of 176 cents per share, up 54%
  • 100% of underlying earnings derived from iron ore segment

Speaking of these results, BHP's CEO, Mike Henry said:

'BHP delivered a strong set of results for the 2020 financial year that reflect the strength, resilience and quality of our people and our portfolio. In a year marked by the challenges of the global COVID-19 pandemic, social unrest in Chile and commodity price volatility, we were safer, more reliable and lower cost.'

Similarly, FMG’s esteemed Chief Executive, Elizabeth Gaines said:

‘Once again, Fortescue's unique, differentiated culture underpinned the delivery of a year of outstanding performance for Fortescue, with record results achieved by the team across all of our key operating and financial measures while sustaining our clear focus on investment for future growth and development.'

How Macquarie reacted to the results

Analysts from Macquarie Wealth Management – who have remained bullish on Australia's iron ore miners due to robust cash flow yields and earnings momentum – reiterated Outperform ratings on both BHP and FMG in the wake of their FY20 results.

Overall, while the investment bank was impressed by BHP's strong free cash flow and headline earnings figures, which came in line with guidance; Macquarie analysts viewed the miner's CAPEX increases and the lack of further capital management announcements as two key negatives.

Regardless, Macquarie has a 12-month price target of $42.00 per share on the ASX-listed BHP, implying upside from current price levels.

As with BHP, Macquarie noted that Fortescue’s final dividend came in below their expectations, while also citing a 13% increase in greenhouse gas emissions as a key negative. Even so, the investment bank saw lots to like about the results, arguing that:

'FMG’s upgrade momentum is strong with a spot price scenario generating +90% higher earnings in FY21 and translating to a FCF yield of 17%.'

Macquarie has a price target of $19.00 per share on FMG.

What are your thoughts on FMG and BHP...

Are you bullish or bearish on the miners in the wake of their full-year results? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) BHP using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘BHP in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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