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BHP's FY19 Earnings and Revenues Up Y/Y on Higher Prices

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BHP Group (BHP - Free Report) reported financial results for fiscal 2019 (ended Jun 30, 2019). For fiscal 2019, earnings per American Depositary Share (ADS) came in at roughly $3.52, up 5% from the prior fiscal year. Underlying attributable profit was $9.1 billion in fiscal 2019, up from $8.9 billion in fiscal 2018.
Revenues & Margins Improve Y/Y
Revenues for fiscal 2019 totaled $44.2 billion, up from the $43.1 billion recorded in the prior fiscal.
Underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $23.1 billion for fiscal 2019, flat, year on year. Higher prices and favorable exchange-rate movement helped offset the negative impact of higher costs, inflation, weather impact and other net movements.

BHP Billiton Limited Price, Consensus and EPS Surprise

Balance Sheet & Cash Flow
Cash and cash equivalents as of Jun 30, 2019 came in at $15.6 billion, down from the $15.9 billion recorded at the end of fiscal 2018. Total interest-bearing liabilities came in at $23.2 billion, down from the $24 billion as of Jun 30, 2018. Capital and exploration expenditure came in at $7.6 billion, flaring up 12% from $6.7 billion incurred in the prior year. The company reaffirmed its capital and exploration guidance at below $8 billion for the fiscal 2020.
As of the end of fiscal 2019, net debt was $9.2 billion, down from $10.9 billion reported as of fiscal 2018 end. This downside reflects generation of strong free cash flow. Therefore, the company updated its net debt target to $12-$17 billion from the prior estimate of $10-$15 billion.
During the reported fiscal, the company paid dividends worth $11.4 billion compared with $5.2 billion paid during fiscal 2018. The company’s board announced that it will pay record final dividend of 78 cents per share. This is equivalent to a payout ratio of 73%.

Other Updates

The company’s three capacity expansion projects are well on track. The Escondida Water Supply Extension project is anticipated to deliver the first water in fiscal 2020. The West Barracouta project is likely to kick off production in calendar-year 2021, while the Western Australia Iron Ore (WAIO) is estimated to achieve supply-chain capacity of 290 Mtpa over the medium term.

At the end of fiscal 2019, BHP had five major projects under development in petroleum, copper, iron ore and potash, with a combined budget of $11.1 billion, over the life of the projects.

On Aug 7, BHP’s board approved an investment of $283 million for the development of the Ruby oil and gas project in Trinidad and Tobago.

BHP’s shares have gained 13.4% over the past year, outperforming the industry’s growth of 4.1%.


Zacks Rank & Key Picks

BHP currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Kinross Gold Corporation (KGC - Free Report) , Alamos Gold Inc (AGI - Free Report) and Arconic Inc (ARNC - Free Report) , each flaunting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of a whopping 140% for 2019. The company’s shares have surged 63.4% over the past year.

Alamos Gold has an outstanding projected earnings growth rate of 280% for the current year. The company’s shares have appreciated 56.5% in a year’s time.

Arconic has an estimated earnings growth rate of 42.7% for the ongoing year. The stock has rallied 17% in the past year.

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