Broker says Rio Tinto share price is trading at a discount

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The Rio Tinto Limited (ASX: RIO) The stock price is on track to end the week in the red.

In morning trading, shares of the mining giant were down almost 1% at $91.50.

That means Rio Tinto’s share price is now down more than 5% this week after investors responded negatively to the miner’s quarterly update.

Is the Rio Tinto share price good?

Morgans analysts believe investors should benefit from the weak Rio Tinto share price.

According to a note, the broker maintained its added rating and $108.00 price target on the company’s stock.

This implies a potential return over 12 months of 18% for investors before dividends and 24% including them.

What did the broker say?

Morgans was disappointed with the miner’s quarterly update and points out that it was a reminder that “there is no quick fix to Rio Tinto’s productivity issues in its global operations.”

He also notes that the company has lowered its forecast for iron ore shipments and refined copper production.

Still, that’s not enough to change the broker’s opinion that Rio Tinto would be a great option in the resource sector right now. Especially since these downward revisions are irrelevant to the company’s long-term prospects.

He explained:

Operational lows and guidance dips are disappointing, but they alone are not material to RIO’s long-term fundamentals. Instead, we remain focused on RIO’s ability to make lasting operational changes to address productivity issues across its global business. We believe that lasting change, especially in productivity at a company of this scale, is not something that can happen quickly with weak quarters like 3Q22 likely to continue to occur in the meantime.

Putting the 3Q22 result into perspective, we still see RIO boasting strong earnings quality, dividend yield, strong balance sheet and trading at a discount to our target price of 108.00. $. We maintain our Add rating.

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