Rio Tinto (RIO) will report financials for the first half of 2023 early Wednesday, with analysts expecting earnings to fall sharply as prices for iron ore and other base metals have fallen this year. RIO shares jumped on Tuesday with other mining stocks also giving buy signals on China’s optimism.
Wall Street predicts Rio Tinto’s first-half earnings will fall 32% to $3.59 per share and sales will fall 11% to $26.54 billion. Iron ore and copper prices are down more than 20% from their peak in 2022.
“We continued to take disciplined action to grow in the materials the world needs for the energy transition,” Rio Tinto CEO Jakob Stausholm said in a statement on July 19, discussing production in the second quarter of 2023.
But Rio Tinto and mining stocks are rising with copper and other metal prices amid optimism that China will ramp up stimulus, especially in the ailing real estate sector. China is the world’s largest importer of iron ore, the largest producer of steel and coal, and the dominant construction market.
Rio Tinto Stocks: Mining Stocks Near Buying Points
Collectively, the 24 stocks in the IBD Mining-Metal Ore industry group are up nearly 16% in 2023, according to MarketSmith. The group has lost about 8% since its March 3 high of 371.74.
On Tuesday, Rio Tinto shares gained 4.2% to 69.84 in above-average volume during market trading. RIO shares are in a six-month consolidation, still well below a buy point of 80.52. But Tuesday’s move from the 200-day line revealed short-term resistance and a trendline, providing multiple reasons for an early entry.
Fellow base-metal giant BHP (BHP) rose 4.4% on Tuesday to 64.19. Still some distance from a buy point of 71.52, BHP stock also flashed an aggressive entry from its 200-day, near-term highs and a trendline.
In the meantime, Freeport-McMoRan (FCX) was up 4.5% to 43.99, erasing a buy point with a double bottom of 43.88. The copper giant and gold miner announced figures last week.
Southern copper (SCCO), whose earnings are expected soon, rose above an official buy point of 82.05 and jumped 6.1% to 84.11% on Tuesday. But SCCO stock is now extended from the 50 days.
Rio Tinto earnings
London-based Rio Tinto was founded in 1873 and is currently the world’s second-largest miner by market value.
Analysts predict Rio Tinto’s full-year earnings will fall about 18% to $6.76 per share. According to FactSet, revenue is expected to fall 9% to $50.74 billion. The consensus on Wall Street is that the biggest pullback from 2022 will be aluminum sales, down 19%.
Rio Tinto revenues from iron ore, copper and diamonds are expected to remain broadly flat from 2022.
Investors will be looking for updates on Rio Tinto projects, including the $140 million lithium project in Argentina. Rio Tino is also expanding copper operations in Mongolia and the US
Lithium and Mining Outlook
On July 19, Rio Tinto announced that its lithium project in Argentina “is still under review in response to cost escalation.”
“We continue to work with communities, the province of Salta and the government of Argentina to ensure an open and transparent dialogue with stakeholders about the works in progress,” said Rio Tinto.
The company added that exploration and evaluation costs in the first half of 2023 totaled $710 million, an increase of 94% over the first half of 2022. This was mainly due to Argentina and other projects.
On May 16, BHP and Rio Tinto presented industry forecasts at the Bank of America Global Metals, Mining and Steel conference.
BHP sees mining activities as an integral part of the global energy transition. It estimates the growing demand for steel, copper, nickel and potash. The mining company does not currently mine lithium. BHP estimates the total investment required from the industry for copper to be approximately $250 billion by 2030.
Meanwhile, Rio Tinto expects a compound annual growth rate (CAGR) of 3.9% for demand for commodities, including steel, aluminum, copper and lithium, from 2022 to 2035.
JPMorgan recently estimated its projected annual growth in demand for refined copper alone at around 2.5% over the next decade.
Rio Tinto stock has a 53 Composite Rating out of 99. Stocks have a 61 Relative Strength Rating. Rio Tinto has an EPS score of 48 out of 99.
Follow Kit Norton on Twitter @KitNorton for more coverage.
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