Rio Tinto Back to Neutral - Analyst Blog
25 Febrero 2013 - 6:50AM
Zacks
On Feb 21, we upgraded metal mining
giant, Rio Tinto Plc. (RIO) to Neutral based on
its improved prospects. Rio Tinto, which focuses on the lucrative
minerals market, was upgraded shortly after reporting impressive
production as well as revenue data for full year 2012.
Why Neutral?
We downgraded Rio to Underperform
on Jan 22. However, we are upgrading our recommendation back to
Neutral for the stock due to an improvement in the production
status of the company. Rio reported improved year-over-year
production for 2012 for some of its products like iron ore, energy
and aluminium.
The acquisition and divestiture
strategies that Rio undertakes are also proving beneficial for it.
With the acquisitions of Turquoise Hill Resources Ltd. as well as
Richards Bay Minerals in 2012, Rio expects to benefit a great deal.
Also, in December 2012, Rio sold off its stake in the Palabora
Mining Company Limited, to focus more on the productive areas.
Also, the company announced
improvements in its cost structure for 2012 with a target to
achieve cost savings to the tune of $5.0 billion by 2015. This will
lead to a cost saving of $3.0 billion annually by 2014.
Moreover, the company also plans to
reduce its capital expenditure for 2013 to $13.0 billion from the
$17.4 billion spent in 2012. This reduction will help the company
boost up the free cash flow, thereby increasing the shareholder
returns. In view of the increased production of iron ore as well as
a recovery in the copper volumes, management also increased the
2012 dividend by 15% to $1.67 per share.
Other Stocks to
Consider
Apart from Rio Tinto, other stocks
in the mining sector that are currently performing well include
Denison Mines Corp. (DNN), Commercial
Metals Company (CMC) and Xstrata Plc.
(XSRAY). All these companies carry a Zacks Rank #2 (Buy).
COMMERCIAL METL (CMC): Free Stock Analysis Report
DENISON MINES (DNN): Free Stock Analysis Report
RIO TINTO-ADR (RIO): Free Stock Analysis Report
XSTRATA PLC U-A (XSRAY): Get Free Report
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