Macquarie sees upside for Rio (ASX:RIO) and BHP (ASX:BHP) share prices

Macquarie points to rising copper prices to lift the Rio Tinto (ASX: RIO) and BHP Group (ASX: BHP) share prices. Here’s the lowdown.

| More on:
asx share price rise represented by rebounding bar chart

Image source: Getty Images

The Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) share prices have retreated in recent days, largely due to going ex-dividend. Despite a lower share price for large cap miners, commodity prices have remained buoyant.

Macquarie Group Ltd (ASX: MQG) has run the ruler over the Rio Tinto and BHP share prices, rating them both as ‘outperform’. 

Rio Tinto and BHP share prices go ex-dividend 

The BHP share price went ex-dividend on 4 March, paying a fully franked interim dividend of $1.298. This resulted in a 3% slide in BHP shares on the day. 

Similarly, Rio Tinto went ex-dividend on 4 March, paying a full franked final dividend amount of $5.171. This translated to a 6.30% fall for Rio Tinto shares on the day. The date a share goes ‘ex-dividend’ is the day on which it starts selling without the value of its next dividend payment. As such, in order to receive the company’s next dividend payment, an investor needs to own the shares before the ex-date.

Macquarie rates both miners as ‘outperform’ 

Macquarie upgraded its forecasts for copper in the short term by 20% and 30% in the medium term. Its bullish view on copper is driven by an anticipated increase in demand from a global effort to transition into renewable and green energy.

Macquarie believes the improved copper price outlook could translate to a 6% to 11% upgrade to earnings for BHP across FY22 to FY25. As a result, the broker raised its BHP share price target from $50 to $55. This represents an upside of ~12% after the BHP share price closed at $48.99 on Tuesday. 

Similarly, the improved copper price outlook could see a 2% to 9% improvement in Rio Tinto earnings across 2021 to 2024. The broker upgraded its target price from $135 to $142. This represents an upside of ~17% after the Rio Tinto share price closed at $121.21 on Tuesday. 

Will iron ore prices continue to stay high? 

While Macquarie has turned its attention to copper as a catalyst to upgrade the Rio Tinto and BHP share prices, the iron ore price is just as important. 

Analysts at Commonwealth Bank of Australia (ASX: CBA) have remained cautious of currently elevated iron ore prices. Their view is that prices could remain above US$140 per tonne for the first half of the year, before moderating as China becomes unable to sustain its commodity and infrastructure-driven growth. In the meantime, iron ore prices have benefitted from China restocking its inventories after its week-long Lunar New Year break during mid-February. 

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News