The Rio Tinto Ltd (ASX: RIO) share price is under pressure on Thursday.
In morning trade, the mining giant's shares are down 2.5% to $117.59.
Why is the Rio Tinto share price falling?
Investors have been hitting the sell button this morning after the miner's half-year results fell short of the market's expectations.
For the six months ended 30 June, Rio Tinto reported a 10% decline in revenue to US$26.67 billion and a 25% reduction in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to US$11.73 billion. The latter compares unfavourably to the consensus estimate of US$12.4 billion.
This reflects a combination of lower commodity prices and higher costs, which offset stronger production over the six months.
In light of this, the Rio Tinto board was forced to slash its fully franked interim dividend by 33% to US$1.77 per share. This represents a 50% payout ratio, which is smack in the middle of its 40% to 60% dividend policy.
What are analysts saying?
Goldman Sachs was pleased with the miner's results. However, it concedes that they were short of consensus estimates, which explains the weakness in the Rio Tinto share price today. It said:
RIO reported an in-line 1H 2023 result with underlying EBITDA/NPAT of US$11.7bn/US$5.7bn, -2%/+2% vs. our estimates and -1% vs. Visible Alpha Consensus Data. Iron ore EBITDA was 4% ahead of GSe on lower costs in the Pilbara (50c/t lower than GSe), aluminium was also ahead of GSe on lower than expected costs at the alumina and Pacific aluminium assets, while copper revenue missed and Iron ore company of Canada costs, and Mineral Sands revenue missed.
On costs, RIO stated that inflation is still having an impact but is slowing, and they expect broadly lower costs in 2H23, particularly for aluminium. The interim dividend of US$1.77/sh was above our US$1.73 estimate but the payout of 50% was in-line with GSe and the 40-60% policy.
Are its shares a buy?
Overall, Goldman Sachs continues to see plenty of value in the Rio Tinto share price.
According to the note, the broker has retained its conviction buy rating with a $126.90 price target. This implies a potential upside of 8% for investors over the next 12 months.
In addition, its analysts are forecasting a US$1.73 per share final dividend in February. This will bring its full-year dividend to US$3.50 (A$5.18) per share, which represents a 4.4% dividend yield.
