BHP Group Shares: Why Analysts Are Turning Cautious

Sentiment around BHP Group (LON: BHP) shares is turning increasingly cautious, with three major brokerages downgrading the mining giant in recent weeks.

BMO Capital was the latest to pull back, cutting its rating to Market Perform from Outperform while maintaining a 2,000p price target on the stock. 

The downgrade follows a rally in BHP shares, which BMO said has brought the stock close to its valuation ceiling. 

The firm also noted that delays at the Jansen potash project have made the share multiple “less compelling,” with free cash flow yields now sitting below historical averages.

Meanwhile, Berenberg took a more pessimistic view, downgrading BHP to Sell from Hold last week. 

The firm warned that capital expenditure is structurally rising and may continue to climb further. It added that the dividend now appears “expensive” and is no longer supported by declining free cash flow, increasing pressure on the company’s balance sheet.

Macquarie also recently downgraded BHP to Neutral from Outperform despite a solid fiscal fourth quarter. 

The brokerage highlighted the “cost blow out” at Jansen Stage 1 as a key concern, raising questions over execution risks in future phases of the project.

Together, the downgrades suggest growing concern among analysts over BHP’s current valuation, despite the stock's decline of nearly 2% this year. Over the past month, the stock has risen by approximately 8.6%.