What to Expect From Rio Tinto's Upcoming Earnings Report?

The lower iron ore output was attributed to ore depletion and a train derailment, but Rio expects to compensate in the year's second half, keeping its annual shipment estimate between 323 and 338 million tonnes. Additionally, Rio has approved a US$6.2 billion investment in the Simandou iron ore project in Guinea, partnering with Chinese state-owned companies, the Winning group, and the Guinean government, aiming for a full capacity production of 120 million tonnes of iron ore. Rio Tinto is going to post its half-year earnings on 31st July, before the market opens.

Goldman Sachs analysts predict Rio Tinto will miss iron ore shipment expectations this quarter due to a train derailment but expect recovery in the second half to meet guidance. For copper, they forecast production of 180kt, surpassing the 175kt consensus, with a higher realized price of US$412 per pound versus US$395 per pound. Similarly, for aluminum, they anticipate 832kt production (above the 829kt consensus) and a price of US$2,818 per tonne (compared to US$2,770 per tonne). The broker also expects Rio Tinto to end the period with a net debt of US$4.9 billion, slightly higher than the US$4.5 billion consensus estimate.

• Despite Rio Tinto reaffirming its FY 2024 iron ore shipment guidance of 323M-338M tons, Jefferies analyst Christopher LaFemina anticipates the final result will likely be at the lower end of the range due to a relatively weak first half.

Jefferies analyst Christopher LaFemina maintained a Buy rating on Rio Tinto shares, citing good long-term value and yield even in a weaker iron ore price environment. While concerned about potential downside risks to iron ore prices, LaFemina believes growth in copper production and higher prices for copper and aluminum will help offset the negative impact. He also expects Chinese steel production to remain resilient, which could benefit Rio Tinto's shipments and production in the coming quarters.

• Q2 iron ore shipments met consensus estimates but fell short of Citi analyst Paul McTaggart's forecast of slightly above 84M tons for Pilbara shipments. However, Rio Tinto produced more aluminum, bauxite, and diamonds than McTaggart estimated, but less alumina, mined copper, and titanium dioxide feedstock.

• RBC Capital Markets analysts assigned a 'negative' sentiment rating to Rio Tinto's update, noting that lowered guidance could impact the stock. They anticipate consensus earnings per share reductions due to mined copper production expected at the low end of the range, influenced by Kennecott, and lowered alumina production guidance due to gas supply issues.