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Industrials

Jefferies Reiterates Buy Rating For Rio Tinto Over Positive Production Results

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The Country Caller covers the specifics of the ratings given by equity groups

Rio Tinto plc (ADR) (NYSE:RIO) was reissued Buy rating by Jefferies Group in a report on Monday. The group also assigned a target price of $37.85, which came with an upside potential of 9%. Barclays also rated Overweight to Rio Tinto, with a possible upside potential of 13.6%.

The ratings came because of positive third quarter fiscal 2016 (3QFY16) production results. The company stated that its Pilbara iron ore production faced a run rate of 330 million tons a year. Due to rail maintenance, Rio stated that it has revised its guidance for the quarter to between 323-330 million tons for 2016.

Simultaneously, mine copper production for the period, January-September 2016, increased by 4% compared to same period last year. This is positive news for the investors. Rio Tinto has been under major cost cutting initiatives, which gives it an edge over its competitors in times of commodity crisis. It has also been cutting on various expansion projects that it believes would not reap enough profits.

Although, there is demand for iron ore coming from China, the company will ship less iron ore. Because of increased demand from China, rivals such as Fortescue Metals Group started to increase iron ore exports. On the other hand, Rio worked on increasing the production of industrial metal and mined copper.

Rio’s stock traded at $34.68, declining 0.49% at Monday close. It traded in the 52-week range of $21.89-37.25. It possesses a huge market capital of $65.28 billion with a year-over-year (YoY) decline of 5.01%.

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