BHP shares take a dive: Delving into the plummeting stock prices

Why are BHP shares dropping into the red today?

BHP Group Ltd (ASX: BHP) shares are experiencing a downward trend in today’s trading session. The mining giant’s stock has seen a decline of 2%, bringing its share price to $42.65. The reason behind this decline can be attributed to the company’s recently released FY 2023 results, which show a significant profit decrease.

Profit Decline

According to the financial report, BHP‘s revenue declined by 17% to US$53.8 billion, while its underlying earnings before interest, tax, depreciation, and amortization (EBITDA) saw an even larger drop of 31% to US$28 billion. Although these figures are disappointing, they are more or less in line with market expectations.

The consensus estimate projected a revenue of US$54,363 million and an EBITDA of US$28,072 million, which indicates a small miss on both metrics. While an underperformance may be identified if one scrutinizes these numbers closely, it is worth noting that the market response could be due to other factors.

Dividend Impact

In addition to the decline in profit, BHP also declared a fully franked final dividend of 80 US cents per share, bringing its total dividend for FY 2023 to US$1.70 per share. This represents a 48% decrease compared to the previous year’s dividend and falls just short of the consensus estimate of US$1.72 per share. This reduction may have contributed to the negative sentiment surrounding BHP shares.

Inflation Concerns

Furthermore, BHP‘s commentary on inflation may also be weighing on its shares. The company reported an effective inflation rate of 10% in FY 2023, which is expected to have continued impact in FY 2024, particularly on labor costs. The anticipation of increased expenses and potential pressure on profits and dividends over the next year could be a reason for investor concern.

Market Sentiment

In summary, the market reaction to BHP‘s FY 2023 results appears to be predominantly negative. While the profit decline and reduced dividend were in line with market expectations, the impact of inflation and uncertainty surrounding future profitability may have contributed to the drop in share price. The market is currently not finding much cause for excitement in BHP‘s performance, resulting in the decline in shares.

It is important to note that this article contains general investment advice only and readers should conduct their own research and seek professional advice before making any investment decisions.