Fortescue Metals Group (FMG) 2020 earnings preview
We look at some of the key things investors should be aware of before iron ore giant Fortescue Metals Group reports its full-year results to the market.
When is the company set to report?
Iron ore giant Fortescue Metals Group (FMG) is set to report its full-year (FY20) results to the market next Monday, 24 August.
Operational summary: FY20 marks a record year for Fortescue
With FMG reporting its June (full-year) production results at the end of July, investors have moderate clarity on what to expect from the miner’s FY20 release.
The key takeaways from Fortescue’s June production report were:
- FMG beat on production guidance, with 178.2 million shipments of iron ore for the full year.
- The company has guided for FY21 iron ore shipments of between 175-180 million tonnes.
- FY21 CAPEX guided for US$3.0-3.4 billion.
- Costs remain low: C1 costs came in at US$12.94 per wet metric tonne in FY20.
- The company achieved average revenue of US$79 per dry metric tonne in fiscal 2020, up 21% YoY.
- Despite the coronavirus pandemic, demand for FMG’s products remains strong, the company noted.
Click here to read our complete summary of FMG’s June Production Report.
FMG share price: How analysts view the stock
Overall, the FMG share price has rallied strongly in 2020, as iron ore continues to trade at elevated levels. All up, since January, the pure play miner’s stock is up an astonishing 65%, far outpacing the ASX 200 benchmark, down 8.5% YTD.
Mind you, despite iron ore futures trading confidently over US$120 per tonne – with the CME front month futures contract last trading at US$122.47 per tonne – analysts remain mixed on the stock, assigning it a Hold rating on average, according to the Wall Street Journal. On a more granular level, FMG has 2 Buy ratings, 12 Hold ratings and 3 Sell ratings, also according to the Wall Street Journal.
Bearish sentiment around the stock mainly appears linked to divergent outlooks for the short and long-term price of iron ore.
Citibank analysts, for example, who have a Sell rating on the stock, recently argued that while the miner’s efforts to deleverage its balance sheet rank as a key positive, the investment bank’s long-term (LT) iron ore price outlook paints a potentially dour outlook for FMG's earnings and dividends.
‘We believe FMG's share price recently has run ahead of our underlying valuation,’ the investment bank said.
Citi has a 12-month price target of $11.70 per share on FMG.
By comparison, analysts from Macquarie Wealth Management remain bullish on the miner, recently reiterating their Outperform rating.
FMG remains Macquarie's favoured iron ore stock out of BHP and RIO, with it being more generally noted that ‘We remain positive on stocks with iron-ore exposure due to strong cash flow yields and earnings upgrade momentum.’
Macquarie has a 12-month price target of $18.00 per share on FMG.
Want to trade FMG before earnings?
You can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.
For example, to buy (long) or sell (short) Fortescue using CFDs, follow these easy steps:
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.