Out of 17 analysts covering Rio Tinto (RIO), 41.2% give it a “buy” rating, 42.1% give it a “hold” rating, and 17.6% give it a “sell” rating. In comparison, both BHP Billiton (BHP) and Vale (VALE) have received “buy” recommendations from 37% of analysts. Among US-focused (DIA) iron ore miners, Cliffs Natural Resources (CLF) has “buy” ratings from just 9% of analysts.
Citigroup (C) upgraded Rio Tinto’s (RIO) rating from “sell” to “neutral” on June 6, 2016. The broker also raised the target price for the stock from 20 pounds to 21 pounds. The upgrade was due to the earnings upgrade for 2016 and 2017 based on higher iron ore price estimates. The broker further forecasts an increase in capital expenditure for RIO. Citigroup’s Heath R. Jansen said, “With the approval of Oyu Tolgoi and the investment into additional Pilbara mine capacity we expect capex to bottom at US$4 billion in 2016, before rising to US$5 billion in 2017 and further to US$5.3 billion in 2018.”
J.P. Morgan (JPM) reiterated its “overweight” rating on Rio Tinto’s stock on May 6, 2016. However, the firm is cautious regarding the widespread deflation across the mining space, which it believes could impact Rio Tinto’s prospects from the Oyu Tolgoi copper and gold mine.
BMO Capital Markets is also bullish on the stock with an “outperform” rating.
Credit Suisse (CS) has a “neutral” rating on the stock. The broker believes that iron ore prices remain the key catalyst for Rio Tinto’s stock.
In the final part of this series, we’ll discuss Rio Tinto’s capital allocation.