Fannie Mae, Freddie Mac shares tumble after conservatorship comments
Investing.com - Berenberg downgraded Rio Tinto (LON:RIO) Plc. (NYSE:RIO) from Buy to Hold and lowered its price target to GBP47.00 from GBP62.00, citing concerns about iron ore prices and other headwinds. The mining giant, currently trading at a P/E ratio of 8.36x and commanding a market capitalization of $96.72 billion, is trading below its Fair Value according to InvestingPro analysis.
The downgrade comes as Rio Tinto shares have drifted lower this year, with Berenberg analysts noting that despite a relatively cheap valuation, the stock has entered a period where it will likely struggle to rerate. Despite market challenges, the company maintains a robust 7.41% dividend yield and has consistently paid dividends for 34 consecutive years.
Iron ore, which represents 61% of Rio Tinto’s projected 2025 EBITDA, faces challenges in the second half of the year without meaningful Chinese economic stimulus, according to Berenberg. The research firm also pointed to rising supply from Simandou, Guinea, which could put additional pressure on prices. With current EBITDA at $19.06 billion and a strong financial health score, InvestingPro subscribers can access 10+ additional exclusive insights about Rio Tinto’s financial outlook.
Berenberg identified Rio Tinto’s acquisition of Arcadium Lithium as another concern, describing it as a "sensible counter-cyclical move" but noting that depressed lithium prices will likely be a financial drag on results for some time.
The unexpected departure of CEO Jakob Stausholm has created strategic uncertainty for the mining giant, particularly amid rumors about a potential combination with Glencore (OTC:GLNCY) that Berenberg suggests would benefit Glencore more than Rio Tinto.
In other recent news, Rio Tinto has announced several significant developments. The company has committed US$1.2 billion to modernize its Isle-Maligne hydroelectric power plant in Alma, Quebec, aiming to secure the future of low-carbon aluminum production in the region. Additionally, Rio Tinto has formed a joint venture with Codelco to develop the Salar de Maricunga lithium project in Chile, with an initial $350 million investment and further commitments contingent on project milestones. In another strategic move, Rio Tinto is investing CA$7.6 million in ore sorting technology at its Lac Tio mine in Quebec, a project supported by the Quebec government.
Meanwhile, JPMorgan has maintained its Overweight rating on Rio Tinto, setting a price target of GBP59.20, citing positive developments in China-US trade discussions as a potential growth driver. In Europe, Goldman Sachs has added ING Groep (AS:INGA) NV, LVMH (EPA:LVMH), and Atlas Copco to its European Conviction List, highlighting potential growth opportunities. For ING, Goldman anticipates an increase in return on tangible equity by 2027, while LVMH is expected to benefit from a luxury market upcycle. Atlas Copco is seen as having potential upside risk to estimates, particularly with a special dividend anticipated at year-end. These recent developments provide a glimpse into the strategic and financial maneuvers of these companies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.