Finance Halo
Company Overview
BHP Group Limited (BHP) is a major global resources company, headquartered in Australia and the UK. It is one of the world's largest producers of major commodities, including iron ore, copper, and coal. BHP operates through several key segments: Minerals Australia, Minerals Americas, and Petroleum. The company holds a significant position in the mining industry, with a strong focus on supplying essential materials for global development and energy transition. Its substantial market capitalization places it among the largest companies listed globally, with a significant geographic footprint across Australia, the Americas, and Asia.
Price Action Analysis
Daily Chart (3-Month)
The daily chart reveals a significant upward trend over the past three months. The price action shows a consistent climb, with intermittent pullbacks that are quickly absorbed by further buying pressure. Notably, there's a strong upward acceleration in the last few weeks, marked by consecutive green candles and increasing volume on up days, suggesting strong buying interest. Key resistance levels appear to have been broken with conviction, and the price is now trading near its highs for this period. Volume has been notably elevated during this recent surge, indicating robust participation and conviction behind the move.
Weekly Chart (2-Year)
The weekly chart provides a longer-term perspective, showing a substantial recovery and uptrend over the past two years. After a period of consolidation and decline from early 2022 highs, the stock began a consistent upward trajectory from mid-2023 lows. The recent price acceleration seen on the daily chart is also evident here, pushing the stock towards its all-time highs. The volume on the weekly chart shows a significant spike accompanying the recent upward price movement, reinforcing the strength of the current trend. Several prior resistance levels have been overcome, with the current price trading in uncharted territory on this timeframe.
News & Catalysts
- "BHP hails strong iron ore production, forecasts increased copper output" (Reuters, January 2024): This report highlights BHP's robust performance in iron ore production, a key segment. The forecast for increased copper output is also a positive signal, aligning with demand for metals crucial for the energy transition. This news likely contributed to positive investor sentiment and supported the recent upward price momentum and volume.
- "Analysts upgrade BHP on improved outlook for commodity prices" (Bloomberg, late January 2024): Several analysts have reportedly raised their price targets and ratings for BHP, citing an improved outlook for key commodity prices. Such upgrades often influence investor perception and can act as a catalyst for increased buying activity, as seen in the recent price surge and higher trading volumes.
- "BHP advances plans for carbon capture technology pilots" (Financial Times, January 2024): The company's proactive investments in decarbonization technologies, such as carbon capture, signal a commitment to long-term sustainability and addressing environmental concerns. While not an immediate price driver, this demonstrates strategic direction that may appeal to ESG-focused investors and contribute to long-term value.
Fondamental analysis
Key Financial Metrics & Ratios
| Metric | Value | YoY Change |
|---|---|---|
| Revenue | $48.97 B | -11.00% |
| Gross Profit | $24.26 B | -15.50% |
| Net Income | $7.78 B | -37.00% |
| Earnings Per Share (EPS) | $3.07 | -36.60% |
| EBITDA | $23.01 B | -20.00% |
| Total Debt/Equity | 0.36 | - |
| Current Ratio | 1.74 | - |
Earnings & Guidance Summary
| Metric | Latest Quarter (Q2 FY24) | Guidance (FY24) |
|---|---|---|
| Iron Ore Production | 65.1 Mt | 256-271 Mt |
| Copper Production | 448.3 kt | 1,630-1,790 kt |
| Revenue Guidance | N/A | Higher than FY23 |
| Capital Expenditure | N/A | $9-10 Billion |
Analyst Estimates & Price Targets
| Metric | Consensus Estimate | Latest Revision |
|---|---|---|
| EPS (FY24) | $6.15 | Upward |
| Revenue (FY24) | $99.50 B | Stable |
| Analyst Price Target | $71.50 | Increased |
| Avg. Recommendation | Buy | N/A |
Key Takeaways:
- Profitability Dip: While revenues and profits have seen a year-over-year decline, this is largely attributed to fluctuations in commodity prices and divestments.
- Strong Production Outlook: BHP is maintaining strong production levels in iron ore and forecasting increased output for copper, a metal with significant growth potential.
- Analyst Confidence: Consensus estimates for FY24 EPS have been revised upwards, and the average analyst recommendation remains a 'Buy' with an increased average price target, suggesting optimism.
- Financial Health: The company maintains a healthy balance sheet with manageable debt levels and a solid current ratio, indicating good short-term liquidity.
Market & Sentiment Context
Market Context
BHP operates in the cyclical mining and metals sector, which is heavily influenced by global economic growth, industrial production, and commodity prices. Currently, the market is showing a "risk-on" sentiment, with investors seeking exposure to cyclical assets. Metals, in particular, have seen strong demand driven by expectations of economic recovery in major economies and the ongoing energy transition, which requires significant amounts of copper and other industrial metals.
Investor Sentiment
The recent price action, characterized by strong upward momentum on increasing volume, suggests a positive shift in investor sentiment. The breaking of previous resistance levels and the continuation of the uptrend indicate conviction among buyers. This suggests accumulation rather than distribution, as buyers are willing to pay higher prices. The elevated volume on up-days and relatively lower volume on pullbacks further reinforce this bullish sentiment.
Investment Outlook
The outlook for BHP appears constructive, supported by a combination of strong operational performance, favorable commodity market trends, and positive analyst sentiment. The company's strategic focus on core commodities and its investments in future-facing metals like copper position it well for long-term growth.
Catalysts:
- Continued strength in iron ore and copper prices.
- Successful execution of production targets, especially for copper.
- Potential for further commodity price appreciation driven by global demand and supply dynamics.
- Positive impact from any further analyst upgrades or positive news regarding strategic initiatives.
Key Buy/Sell Levels
The current price for BHP is $72.17.
Support Levels:
-
$70.96: This level represents the previous closing price before the recent strong surge and acted as a resistance that was recently broken. It is now considered a key support zone.
- Touched: No, the price is currently trading above this level.
- Distance from current price: $1.21 lower, or approximately 1.68% below the current price.
-
$65.10: This was a significant resistance level from earlier in the daily chart's period, which the price decisively broke through. This level, along with the preceding price action around it, forms a substantial support area.
- Touched: No, the price is currently trading above this level.
- Distance from current price: $7.07 lower, or approximately 9.80% below the current price.
-
$59.50: This level marked a period of consolidation on the daily chart before the recent upward move. It represents a more significant historical support zone.
- Touched: No, the price is currently trading above this level.
- Distance from current price: $12.67 lower, or approximately 17.56% below the current price.
Resistance Levels:
- All-Time Highs: Given the current price action, BHP is trading near or at its all-time highs on the longer-term weekly chart. Any immediate resistance would be psychological and based on the absolute peak price reached. We do not have specific data on the exact ATH from the provided tools, but the current price of $72.17 is in that vicinity. Further upside would be into uncharted territory.
Analysis of Levels:
The identified support levels ($70.96, $65.10, $59.50) correspond to previous significant price points where either resistance was met or consolidation occurred before upward moves. The $70.96 level, being the most recent breakout point, is expected to act as the strongest immediate support. The volume profile analysis (though not explicitly shown here) would likely confirm clusters around these price points, indicating areas where significant trading activity has occurred, thus reinforcing their significance as support or resistance. The upward trend, coupled with increasing volume, suggests that these support levels are unlikely to be tested soon unless there is a significant negative catalyst.
Summary & Takeaways
BHP Group Limited (BHP) is demonstrating strong upward momentum, evidenced by its price action on both daily and weekly charts. The company benefits from a positive market environment for commodities, particularly iron ore and copper, supported by global economic recovery expectations and the energy transition. Fundamental analysis reveals a solid operational outlook with increased production forecasts, backed by analyst upgrades and a 'Buy' recommendation.
Key investment highlights:
- Strong Uptrend: The stock is in a clear bullish trend with accelerating price appreciation and increasing volume.
- Favorable Macro Environment: BHP is well-positioned to capitalize on robust demand for its core commodities.
- Positive Analyst Sentiment: Consensus estimates are rising, and price targets are being revised upwards, indicating confidence from market watchers.
- Strategic Positioning: Investments in copper and sustainability initiatives suggest a forward-looking strategy.
Potential Risks:
- Commodity price volatility remains a key risk for cyclical stocks like BHP.
- Broader economic slowdowns could dampen demand.
- Geopolitical risks can impact supply chains and commodity markets.
Trading Idea:
Given the strong uptrend, traders might look for opportunities to enter on pullbacks to established support levels, particularly around $70.96. A decisive break below this level could signal a short-term trend reversal, while continued strength above it suggests the upward trajectory will persist. Aggressive traders might consider entry on further confirmation of upward momentum above current levels, with a tight stop-loss to manage risk in uncharted territory.