Of the 16 analysts covering Rio Tinto (RIO), 44% gave it a “buy” rating, 44% gave it a “hold” rating, and 12% gave it a “sell” rating. In comparison, both BHP Billiton (BHP) and Vale SA (VALE) have received “buy” recommendations from 42% and 29% of analysts, respectively.
Among the US-focused (DIA) iron ore miners, Cliffs Natural Resources (CLF) has “buy” ratings from 22% of the analysts covering the stock. Although the number of “buy” ratings for Rio Tinto stock has declined by 36%, “hold” ratings have risen by 40% since the start of 2016.
Target price changes
There have been no rating changes for Rio Tinto after its results for the first half of 2016. However, several analysts have revised their target prices for the stock. Jefferies increased its target price from $35 to $38 while reiterating its “outperform” rating. Macquarie increased its target price on August 4, 2016.
Deutsche Bank also reiterated its “buy” rating for Rio Tinto with a target price of $43.
Most likely, there will be pressure on cash flows as long as the supply-demand balance isn’t restored in the commodities market with the exit of high-cost capacity.
Operating expenses and capital expenditure flexibility should position Rio Tinto well for the challenging times. As commodity markets rebalance, Rio Tinto could outperform its diversified peers such as Anglo and Glencore.