Why Analysts Are Bullish on BHP Billiton’s Fiscal 2018


Sep. 15 2017, Updated 10:40 a.m. ET

Firm commodity prices

After coming under pressure, iron ore prices have rebounded to reach ~$78 per ton. The prices for other commodities (USCI) have also remained quite firm lately.

BHP Billiton (BHP) released its fiscal 2017 results on August 21, 2017. These results have helped shape the analysts’ estimates for the company. For a detailed analysis of BHP’s fiscal 2017 results, please read BHP Billiton: Should We Expect More Value after Fiscal 2017 Results?

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Revenue and earnings estimates

Wall Street analysts are expecting BHP Billiton (BHP) to achieve revenues of $38.3 billion in fiscal 2018,[1. fiscal year ending June 30, 2018] reflecting growth of 2.5% year-over-year (or YoY). The company saw 24% growth in its fiscal 2017 revenues. 

Growth in production, as well as an increase in commodity prices, led to this impressive gain in revenues. The rather muted growth for fiscal 2018 and fiscal 2019 was due to lack of any significant production growth. Most of the change was driven by the expectation of commodity price changes. The implied growth for fiscal 2019 is 0.5%.

EBITDA estimates

The forecast as compiled by Thomson Reuters for BHP’s fiscal 2018 EBITDA[1. earnings before interest, tax, depreciation, and amortization] is ~$20.1 billion. This implies an EBITDA margin of 51.2%, compared to 53.0% in fiscal 2017. 

After a strong run for iron ore prices in 2016 and 2017 year-to-date, analysts could expect the prices to weaken going forward, leading to a slight weakening in margins despite a rise in revenues. The EBITDA estimate for fiscal 2019 is still lower at $19.6 billion, implying a margin of 49.8%.

Mining giants Glencore International (GLNCY), Southern Copper (SCCO), Teck Resources (TCK), and Freeport-McMoRan (FCX) have also seen their estimates revised slightly upward due to the recent strength in commodity prices.


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