BHP Group Limited (ASX: BHP) has completed a significant strategic shift, with copper now serving as the primary profit driver for the mining giant. In fiscal 2026, copper accounted for 54% of the company's underlying EBITDA, surpassing iron ore for the first time in a full year. This milestone underscores the company's successful pivot toward metals critical for the global energy transition.
The market responded positively to the results, with BHP shares closing 3.2% higher at A$65.75 on Thursday, ahead of the Australian market open on Friday. The stock's advance added approximately A$10 billion to the company's market capitalization, bringing it to A$323.7 billion. Trading volume was robust at A$608.5 million, making BHP the most traded stock on the ASX.
Underlying EBITDA from copper reached US$18.19 billion, a 48% increase year-over-year, while iron ore contributed US$14.53 billion. The copper segment's EBITDA margin of 70% significantly outpaced the group's overall margin of approximately 56%. This performance was driven by a 35% rise in realized copper prices to US$5.74 per pound, which offset a 3% decline in production to 1.953 million tonnes.
Strong Financial Results
The company reported revenue of US$58.8 billion, up 15% from the prior year, and underlying EBITDA of US$32.9 billion, a 27% increase. Underlying attributable profit climbed 30% to US$13.2 billion, while net profit rose 9% to US$9.8 billion. The full-year dividend was raised 57% to US$1.72 per share, representing approximately 66% of underlying profit and marking the largest payout in four years.
Balance sheet strength was evident, with net debt falling to US$8.69 billion, below analyst forecasts. Capital and exploration expenditure totaled US$10.3 billion, reflecting continued investment in growth projects, particularly in copper.
Copper Demand Outlook
Chief Executive Brandon Craig highlighted that copper demand is being driven by data centers and power infrastructure, with global demand projected to reach 50 million tonnes by 2050, up from roughly 34 million tonnes today. BHP has committed to increasing copper production by as much as 40% by 2035, focusing on long-term growth projects despite near-term challenges.
However, the fiscal 2027 production guidance of 1.65–1.80 million tonnes implies a midpoint decline of 11.7% from fiscal 2026 levels. Declining ore grades at Escondida, the company's flagship copper mine, are the primary contributor to this expected drop, although BHP is pushing forward with expansion initiatives.
Valuation Concerns
Despite the strong earnings and strategic shift, analysts remain cautious. The stock is trading at approximately 23 times trailing earnings, a premium to peers like Fortescue Ltd (ASX: FMG), which trades at about 13 times but remains heavily reliant on iron ore. The consensus price target among 17 analysts is A$59.86, implying a downside of nearly 9% from the current level.
Recent analyst actions reflect this skepticism. Bernstein (August 11) issued a Hold rating with a target of A$44.02, representing a 33% potential decline. Morgan Stanley (August 6) maintained a Buy with a target of A$67.00, offering only a 1.9% upside. Citi (August 3) and Bank of America (July 22) both have Hold ratings with targets of A$63.00 and A$65.00, respectively.
Risks and Market Sentiment
Copper prices remain cyclical, and the production guidance for fiscal 2027 points to a decline. Lower grades at Escondida, potential labor disputes, and rising project costs could pressure margins. Additionally, a slowdown in China, a major consumer of both copper and iron ore, could dampen demand and affect BHP's earnings.
Investors will be watching Friday's market open to see if the earnings-driven re-rating has further momentum. The company's success in expanding copper production and maintaining prudent capital allocation will be key to sustaining shareholder value. For now, the share price has surpassed most analysts' expectations, leaving limited room for upside in the near term.
