Rio Tinto Ltd (ASX: RIO) shares are edging higher on Thursday.
At the time of writing, the mining giant's shares are up 0.5% to $116.52.
This appears to have been driven by a reasonably positive reaction to the miner's quarterly update from brokers.
Who is bullish on Rio Tinto shares?
Goldman Sachs has responded well to Rio Tinto's quarterly update.
While its analysts acknowledge that some areas of the business (refined copper, alumina, iron ore pellets) are underperforming for various reasons and have had their production guidance downgraded, its key operations are performing well. Goldman commented:
Some unplanned maintenance, equipment reliability issues, and delays to scheduled maintenance and weather related one-offs has resulted in 2023 production guidance being downgraded, with the lower end of range expected for refined copper, alumina, Fe pellets, TiO2, and bauxite. Importantly though, Pilbara iron ore shipments are now expected to be the top end of the 320-335Mt guidance range (GSe already at upper end), and the Oyu Tolgoi underground copper mine is ramping up faster than expected.
Following the release of the update, the broker has amended its earnings estimates for the first half. It said:
We forecast underlying earnings of US$5.6bn, down 35% YoY; underlying EBITDA of US$11.9bn (vs. Visible Alpha Consensus Data of US$12.4bn prior to the 2Q update), net debt of US$3.3bn, and DPS of US$1.73/sh (based on a total payout ratio of 50%; ordinary policy is 40-60%).
Are its shares good value?
Goldman has reiterated its buy rating on Rio Tinto shares with a trimmed price target of $126.60. This implies a potential upside of 8.5% for investors from current levels.
Sweetening the deal further, the broker expects fully franked dividend yields of 4.4% in FY 2023 and then 5.1% in FY 2024. This stretches the total return to approximately 13% for investors over the next 12 months.
Overall, this could potentially make Rio Tinto worth a look if you're wanting mining sector exposure.
