‘We remain cautious’: Could the BHP share price be heading south?

The BHP Group Ltd (ASX: BHP) share price is in the red in early afternoon trading.

BHP shares closed yesterday at $37.11 and are currently trading for $36.56, down 1.48%.

This comes despite a 3% overnight lift in iron ore prices, bringing the industrial metal back up to just off US$100 per tonne.

The increase has also failed to boost the other S&P/ASX 200 Index (ASX: XJO) iron ore giants today. Fortescue Metals Group Limited (ASX: FMG) shares are down 3.02%, while the Rio Tinto Limited (ASX: RIO) share price is down 2.99% at the time of writing.

Yet, despite today’s fall, UBS analyst Lachlan Shaw still believes the BHP share price is overvalued.

Why is UBS cautious on the outlook for the BHP share price?

The broker’s caution stems from the June quarterly results BHP released on Tuesday morning.

As The Australian reports, it’s led Shaw to cut his target for the BHP share price by nearly 7% to $35.50. Shaw has also reduced his 2023 financial year earnings estimate for the miner by 9% and slashed his FY24 earnings estimate by 23%.

According to Shaw:

We remain cautious on the stock with a neutral rating as we expect earnings and free cash flow to deteriorate in FY23 with costs lifting and prices falling; this will result in lower returns to shareholders.

What did the mining giant report for the June quarter?

The BHP share price fell 1.0% on Tuesday despite the company releasing strong quarterly results. That was more than twice the 0.4% loss posted by the ASX 200 on the day.

The miner reported an 8% quarter-on-quarter increase in its iron ore production, which was within its guidance range. Production of the industrial metal was flat compared to the June quarter in 2021.

Copper production, also in line with guidance, was up 25% quarter-on-quarter but was down 4% year-on-year.

The miner’s nickel production fell short of guidance, hindered by a smelter outage.

BHP share price snapshot

The BHP share price is down 14% in 2022. This compares to a year-to-date loss of 11% posted by the ASX 200.

It has also fallen 27% since this time last year and 10% over the past month.

The post ‘We remain cautious’: Could the BHP share price be heading south? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• ‘We have clearly seen the peak’: Sector veteran gives earnings season warning for ASX mining shares

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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