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A Look at Analysts’ Recommendations for Rio Tinto

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Analysts’ ratings

Out of the 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% and 17% of analysts, respectively.

Among the US-focused (DIA) iron ore miners, Cliffs Natural Resources (CLF) has “buy” ratings from just 18% of the analysts covering the stock. Although the number of “buy” ratings have declined by 36%, “hold” ratings have risen by 40% since the start of 2016 for Rio Tinto’s stock.

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Rating changes

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. This upgrade was due to the earnings upgrade for 2016 and 2017 based on higher iron ore price estimates.

Citigroup further forecasts an increase in capital expenditure for RIO. Citigroup’s Heath R. Jansen noted, “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, issuing 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.

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