RIO FY 2021 Earnings Preview: Where next for RIO stock?

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Tony Sycmore
By :  ,  Market Analyst

RIO is a dual-listed company traded on both the London Stock Exchange and the Australian Stock Exchange. It is due to report its full-year 2021 results on Wednesday, February 23.

Iron ore accounts for just over 80% of RIO’s underlying earnings (Underlying EBITA). Robust demand for iron ore from China and other parts of the world during the first half of 2021 pushed the iron ore price above $US230 per tonne in May of 2021.

The surge in the iron ore price propelled the share price of RIO to a record high of $137.77. It enabled the company to report a 124% jump in earnings from its iron ore operation and a whopping $US561c per share interim dividend at its interim earnings report for the period ending June 30.

The report highlighted some blemishes, including an uphill battle to hit production targets. At its third-quarter production result handed down in mid-October, the company downgraded guidance, including that from its flagship iron ore operations.

“We now expect Pilbara shipments to be 320 to 325 million tonnes (previously at the low end of 325 to 340 million tonnes) following modest delays to completion of the new greenfield mine at Gudai-Darri and the Robe Valley brownfield mine replacement project due to the tight labour market in Western Australia.”

The other major challenge that the company has faced is a plunge in the iron ore price to below $90 per tonne in late November as the Chinese economy stalled following a regulatory reset that impacted the real estate market and steel production.

Rio Tinto’s full-year earnings are expected to be $US21.7 billion NPAT, and a dividend payout of $US439c per share, putting the company on a projected dividend yield of over 10%!!

Rio Tinto shares will trade ex-dividend on March 10. This is when investors must have purchased the company’s shares to be eligible for the upcoming dividend payment.

RIO Share Price Chart

The share price of RIO has tracked the iron ore price over the past six months, falling ~35% from its June high of $137.33 to its $87.28 low in November.

Following an easing in Chinese monetary policy in early December, the price of iron ore has rallied, and by extension, so to the share price of RIO.

As the easing in Chinese monetary policy is expected to remain supportive, the preference is to buy RIO on dips back towards trend channel support at $110.00, looking for the price to rally towards $125 in the coming months.

 

RIO Daily Chart 9th of Feb

Source Tradingview. The figures stated areas of February 9 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

 

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