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Rio Tinto will reveal its full-year earnings on 11 February, and traders are anticipating revenue of $34.36 billion and adjusted net income of $4.65 billion. These forecasts represent a 23% fall in revenue and 50% drop in adjusted net income.
The company will also report its second-half numbers on the same date, and investors are expecting revenue of $17.26 billion and adjusted net income of $1.44 billion, and that compares with the first-half revenue and adjusted net income of $17.89 billion and $2.92 billion respectively.
Rio Tinto is feeling the pain of the commodity rout, and the collapse in the price of metals has hit the miner hard. Revenues and profits are dropping as the underlying metal prices remain weak. Like many in its sector, Rio Tinto has had to pull back on capital expenditure and reduce costs as cash has become very valuable for companies in the commodity space.
The company is keeping its shareholders happy by continuing to pay a healthy dividend, which is no longer a certainty for companies in the same industry. The big question will be how long it can maintain its dividend while commodity prices keep crumbling. Even well financed firms get dragged lower in a downturn, and while the metals market outlook is gloomy so is Rio Tinto’s.
|12M trailing price/earnings||12 M forward price/earnings||Price/book value||Dividend yield||5 year dividend growth|
|Rio Tinto Ltd||14.55||9.33||0.99||10.18%||20.82%|
Rio Tinto’s low price to earnings ratio indicates it is undervalued when compared with the broader market, and the book value to price figure confirms this. The decline in forward-looking price to earnings ratio points to an increase in future earnings. Rio Tinto’s book valuation to price is by far the highest of the mining companies listed above, but it also has a respectable dividend yield and dividend growth rate.
Glencore and Anglo American are trading well below their book value, but both companies suspended their dividends in order to conserve cash.
Earnings vs estimates
Out of the past eight full-year results from Rio Tinto, the company exceeded the revenue forecast 50% of the time, and it topped the EPS estimate 75% of the time. Volatility can be expected on the day of the announcement, and on average the stock has moved 2.74%, but only 50% of the price reactions have been positive.