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BHP Trades at a Premium: Should You Still Buy the Stock?
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Key Takeaways
BHP posted 1H26 revenues up 11% to $27.9B and EBITDA up 25% to $15.5B, with copper driving 51% of EBITDA.
BHP expects FY26 iron ore output of 258-269 Mt, supported by low-cost WAIO and steady production gains.
BHP is boosting copper and potash spend, advancing Jansen and securing $4.3B via a silver streaming deal.
BHP Group Limited (BHP - Free Report) currently trades at a forward price-to-earnings multiple of 14.87X, at a premium to the Zacks Mining - Miscellaneous industry’s average of 14.20X.
The stock is also trading at a premium compared with miners like Rio Tinto Group (RIO - Free Report) and Vale S.A (VALE - Free Report) , at 11.41X and 7.77X, respectively.
Image Source: Zacks Investment Research
BHP shares have gained 43.5% in the past six months, outperforming the industry’s 24% growth. The Basic Materials Sector and S&P 500 have gained 19.3% and 2.1%, respectively. Over the same period, Rio Tinto and Vale have fared better, gaining 50.5% and 55.7% respectively.
BHP’s Performance vs. Industry, Sector, S&P 500 & Peers
Image Source: Zacks Investment Research
Against this valuation and performance backdrop, the key question for investors is whether BHP’s valuation premium is justified.
BHP’s 1H26 Performance Driven by Pricing and Cost Discipline
Revenues increased 11% to $27.9 billion, reflecting higher copper and iron ore prices in the first half of fiscal 2026. Underlying EBITDA increased 25% to $15.5 billion. Copper contributed 51% of the group's underlying EBITDA, rising to a record $8 billion. Underlying EBITDA margin was 58.4% compared with 51.1% in the comparable period last year.
Disciplined cost control, strong operational performance and favorable commodity pricing led to a 22% year-over-year increase in underlying attributable profit to $6.2 billion.
BHP’s Production Strength Supports Full-Year Visibility
Iron ore output was 133.8 Mt in the first half of fiscal 2026, up 2% year over year. Production at Western Australia Iron Ore (WAIO) was a record 129.8 Mt (146.6 Mt on a 100% basis). WAIO continues to rank among the lowest-cost iron ore operations globally.
For fiscal 2026, BHP expects iron ore production of 258-269 Mt, with WAIO contribution at 251-262 Mt (284-296 Mt on a 100% basis). This factors in the planned renewal of Car Dumper 3 (CD3) and the ongoing tie-in activities for Rail Technology Program 1 (RTP1). The company is already halfway through the targeted fiscal 2026 and poised to offset the impact of a typically wet third quarter.
Over the medium term, WAIO production is expected to exceed 305 Mt annually, supported by expanded rail operation capacity unlocked by RTP1 and the Western Ridge Crusher Project. BHP is investing in a sixth car dumper and related infrastructure at Port Hedland.
Net operating cash flow increased 13% to $9.4 billion in the first half of fiscal 2026, driven by higher realized copper and iron ore prices. Free cash flow increased 10% to $2.9 billion, after spending $5.3 billion on capital and exploration projects. Capital and exploration spending is budgeted at $11 billion for fiscal 2026 and 2027, averaging $10 billion annually from fiscal 2028 to 2030.
To benefit from decarbonization, electrification, population growth and rising living standards in emerging markets, BHP plans to focus more on commodities such as copper and potash, allocating nearly 70% of its medium-term capital expenditure to these areas.
BHP has achieved 30% growth in copper production in the last four years, and copper production reached 984 kt in the first half of fiscal 2026. The company’s expected copper production is 1.9-2.0 Mt for fiscal 2026.
The company submitted the "Escondida New Concentrator" project to the Environmental Assessment System as part of its ongoing efforts to grow the business. The new concentrator, with a likely investment of $4.4-$5.9 billion, will replace the historic Los Colorados plant, which is approaching the end of its operating life. BHP plans to install new capacity to produce 220 – 260 kt of copper annually.
Resolution Copper, a joint venture owned by BHP (45%) and Rio Tinto (55%), and the United States Forest Service (USFS) have announced the completion of a Federal land exchange. This milestone enables the next phase of technical work and development planning for the Resolution Copper project, which is one of the most significant undeveloped copper resources in the United States.
BHP is also advancing the Jansen Stage 1 potash project, a large-scale, low-cost, high-grade resource with a mine life exceeding 100 years. BHP is working toward its first production by mid-2027. Once operational, Jansen Stage 1 is expected to produce 4.35 million tons of potash annually. Stage 2 of the project has been 14% completed and is expected to deliver its first production in fiscal 2031.
These investments will transform Jansen into one of the world’s largest potash mines, doubling production capacity to 8.5 million tons per year, positioning BHP as a major global producer of potash by the end of the decade.
BHP’s Earnings Reflect Growth in 2026, Dip Expected in 2027
The Zacks Consensus Estimate for BHP’s fiscal 2026 earnings is pegged at $4.95 per share, indicating 36% year-over-year growth. The estimate for fiscal 2027 is $4.93, suggesting a 0.6% dip.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2025 and 2026 has moved north over the past 90 days.
Image Source: Zacks Investment Research
Our Final Take on BHP Stock
BHP benefits from industry-leading iron ore assets, expanding exposure to copper and potash, and disciplined capital allocation. Investors holding BHP shares should continue to do so to benefit from the solid long-term fundamentals. However, new investors can wait for a better entry point considering the stock’s premium valuation and recent underperformance relative to peers, coupled with the earnings decline expected next year.
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BHP Trades at a Premium: Should You Still Buy the Stock?
Key Takeaways
BHP Group Limited (BHP - Free Report) currently trades at a forward price-to-earnings multiple of 14.87X, at a premium to the Zacks Mining - Miscellaneous industry’s average of 14.20X.
The stock is also trading at a premium compared with miners like Rio Tinto Group (RIO - Free Report) and Vale S.A (VALE - Free Report) , at 11.41X and 7.77X, respectively.
BHP shares have gained 43.5% in the past six months, outperforming the industry’s 24% growth. The Basic Materials Sector and S&P 500 have gained 19.3% and 2.1%, respectively. Over the same period, Rio Tinto and Vale have fared better, gaining 50.5% and 55.7% respectively.
BHP’s Performance vs. Industry, Sector, S&P 500 & Peers
Image Source: Zacks Investment Research
Against this valuation and performance backdrop, the key question for investors is whether BHP’s valuation premium is justified.
BHP’s 1H26 Performance Driven by Pricing and Cost Discipline
Revenues increased 11% to $27.9 billion, reflecting higher copper and iron ore prices in the first half of fiscal 2026. Underlying EBITDA increased 25% to $15.5 billion. Copper contributed 51% of the group's underlying EBITDA, rising to a record $8 billion. Underlying EBITDA margin was 58.4% compared with 51.1% in the comparable period last year.
Disciplined cost control, strong operational performance and favorable commodity pricing led to a 22% year-over-year increase in underlying attributable profit to $6.2 billion.
BHP’s Production Strength Supports Full-Year Visibility
Iron ore output was 133.8 Mt in the first half of fiscal 2026, up 2% year over year. Production at Western Australia Iron Ore (WAIO) was a record 129.8 Mt (146.6 Mt on a 100% basis). WAIO continues to rank among the lowest-cost iron ore operations globally.
For fiscal 2026, BHP expects iron ore production of 258-269 Mt, with WAIO contribution at 251-262 Mt (284-296 Mt on a 100% basis). This factors in the planned renewal of Car Dumper 3 (CD3) and the ongoing tie-in activities for Rail Technology Program 1 (RTP1). The company is already halfway through the targeted fiscal 2026 and poised to offset the impact of a typically wet third quarter.
Over the medium term, WAIO production is expected to exceed 305 Mt annually, supported by expanded rail operation capacity unlocked by RTP1 and the Western Ridge Crusher Project. BHP is investing in a sixth car dumper and related infrastructure at Port Hedland.
BHP’s Robust Cash Flow Supports Ongoing Investment
Net operating cash flow increased 13% to $9.4 billion in the first half of fiscal 2026, driven by higher realized copper and iron ore prices. Free cash flow increased 10% to $2.9 billion, after spending $5.3 billion on capital and exploration projects. Capital and exploration spending is budgeted at $11 billion for fiscal 2026 and 2027, averaging $10 billion annually from fiscal 2028 to 2030.
BHP’s Strategic Pivot Toward Future-Facing Commodities
To benefit from decarbonization, electrification, population growth and rising living standards in emerging markets, BHP plans to focus more on commodities such as copper and potash, allocating nearly 70% of its medium-term capital expenditure to these areas.
BHP has achieved 30% growth in copper production in the last four years, and copper production reached 984 kt in the first half of fiscal 2026. The company’s expected copper production is 1.9-2.0 Mt for fiscal 2026.
The company submitted the "Escondida New Concentrator" project to the Environmental Assessment System as part of its ongoing efforts to grow the business. The new concentrator, with a likely investment of $4.4-$5.9 billion, will replace the historic Los Colorados plant, which is approaching the end of its operating life. BHP plans to install new capacity to produce 220 – 260 kt of copper annually.
Resolution Copper, a joint venture owned by BHP (45%) and Rio Tinto (55%), and the United States Forest Service (USFS) have announced the completion of a Federal land exchange. This milestone enables the next phase of technical work and development planning for the Resolution Copper project, which is one of the most significant undeveloped copper resources in the United States.
BHP is also advancing the Jansen Stage 1 potash project, a large-scale, low-cost, high-grade resource with a mine life exceeding 100 years. BHP is working toward its first production by mid-2027. Once operational, Jansen Stage 1 is expected to produce 4.35 million tons of potash annually. Stage 2 of the project has been 14% completed and is expected to deliver its first production in fiscal 2031.
These investments will transform Jansen into one of the world’s largest potash mines, doubling production capacity to 8.5 million tons per year, positioning BHP as a major global producer of potash by the end of the decade.
BHP’s Earnings Reflect Growth in 2026, Dip Expected in 2027
The Zacks Consensus Estimate for BHP’s fiscal 2026 earnings is pegged at $4.95 per share, indicating 36% year-over-year growth. The estimate for fiscal 2027 is $4.93, suggesting a 0.6% dip.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2025 and 2026 has moved north over the past 90 days.
Image Source: Zacks Investment Research
Our Final Take on BHP Stock
BHP benefits from industry-leading iron ore assets, expanding exposure to copper and potash, and disciplined capital allocation. Investors holding BHP shares should continue to do so to benefit from the solid long-term fundamentals. However, new investors can wait for a better entry point considering the stock’s premium valuation and recent underperformance relative to peers, coupled with the earnings decline expected next year.
BHP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.