BHP Results Miss Expectations: How Low Will the BHP Share Price Go?

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At time of writing, BHP Group Ltd’s [ASX:BHP] share price is down a further 1.43%, trading at $35.73.

This means that the BHP share price has now fallen 15.6%, from its 52 week high of $42.33 on July 3.

The BHP share price has recently seen a bearish crossover of its 20- and 50-day moving averages:

Source: tradingview.com

BHP’s results missed analyst expectations, despite a record full year total dividend of $US2.35 a share. We give you a quick rundown of the RBA’s forecast for iron ore prices and what BHP might do to pivot their business to more profitable resources.

How to buy into the NEXT battery boom (free report)

BHP results underwhelm, BHP share price falls again

According to Bloomberg, analysts were expecting underlying earnings of $US9.98 billion, and BHP missed the mark, with the result reporting $US 9.4 billion in underlying profit.

They did however declare a record dividend $US2.35 per share, which beat the consensus of $US2.216.

So, a bit of salve for investors hurting after the recent fall in iron ore price.

But with Brazilian production in the process of ramping up, there could be more pain ahead for BHP investors.

In terms of geopolitical risk, BHP will have to contend with the prospect of further US-China trade tensions.

Trump has recently delayed the additional 10% tariff measure, which is now set to go into force 15 December, rather than the initial 1 September deadline.

BHP is in a tricky position, with any impact on the Chinese economy likely to impact demand for iron ore.

It is now conceivable that in the short-term, the BHP share price could fall back to pre-Brazil levels which would be in the $30–$32 range.

RBA iron ore price forecast points to negative outlook for BHP share price

It gets worse for long-term BHP investors.

This is the data the RBA is looking at with regards to the iron ore price:

 Source: RBA

While the consensus was clearly off in the past, this was due to unforeseen events in Brazil.

With the price of benchmark 62% fines projected to hit nearly $US50 by 2021, BHP will have to act quickly to keep earnings ticking over.

The company is spending around $60 million on copper exploration in the coming financial year and has a range of copper projects in development in Australia and South America.

This is important as copper will play an increasing role in the EV push.

An electric vehicle requires about 80kgs of copper.

You also have to consider EV charging stations.

Research and consultancy group Wood Mackenzie predicts that the $20 million electric vehicle (EV) charging stations will be up and running by 2030.

They forecast that once this happens, demand for copper in charging stations will consume more than 250% more copper than they do in 2019.

So copper could offset some of the decline in the iron ore price over the coming years for BHP.

Nickel demand could be driven by EV boom

Aside from copper, there are other options for resource investors thinking about the EV boom.

One of these is nickel, which is set to play an increasing role in EV batteries as it increases energy density.

This is BHP’s forecast for nickel demand:

Source: BHP Group Limited

Something to consider if you had pinned your hopes on a rising lithium price.

If nickel intrigues you, we have an excellent free report on nickel stocks available for download. It offers a more detailed explanation of the role of nickel in batteries as well as the demand/supply narrative. Download it for free today.

Regards,

Lachlann Tierney

For Money Morning

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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