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How Wall Street Views Iron Ore Miners ahead of 4Q17

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Part 4
How Wall Street Views Iron Ore Miners ahead of 4Q17 PART 4 OF 10

Why Rio Tinto Isn’t RBC’s Top Pick Anymore

Analysts’ ratings of Rio Tinto

Rio Tinto (RIO) has the highest percentage of “buy” ratings among the iron ore miners we are discussing in this series. According to Thomson Reuters, of the 15 analysts covering RIO, 73% gave it a “buy” recommendation, while 13% gave it a “hold” recommendation. 

In comparison, BHP Billiton (BHP) and Vale (VALE) have each received “buy” recommendations from 53% and 43% of the analysts, respectively.

Why Rio Tinto Isn’t RBC’s Top Pick Anymore

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Cliffs Natural Resources (CLF), which is mainly exposed to the US (SPY) (SPX) domestic steel market, has “buy” recommendations from 33% of the analysts covering it.

RBC’s downgrade

As we saw previously in this series, RBC Capital Markets downgraded BHP on concerns of maturing assets. The firm also downgraded Rio’s stock from its “top pick” to “outperform” on August 15, 2017. However, it kept the target price unchanged at 42 British pounds. 

The removal from RBC’s top pick category is related to the slowing property market in China. However, the firm still views Rio’s stock favorably. It believes that China’s structural reforms can benefit miners such as Rio. The firm also stated that Rio rebalanced its cash returns, balance sheet, and growth requirements, which reaffirms its sound position.

Other rating changes

On June 30, 2017, Bank of America Merrill Lynch upgraded Rio Tinto stock from “underperform” to “buy.”

Barclays reiterated its “overweight” rating on Rio Tinto in September 2017. The firm has a target price of 41 British pounds on the stock.

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