Rio Tinto Ltd (ASX: RIO) shares are falling on Thursday morning after investors responded negatively to the miner's full-year results.
At the time of writing, the mining giant's shares are down 2% to $123.08.
Rio Tinto shares fall on results release
For the 12 months ended 31 December, Rio Tinto reported a 3% decline in revenue to US$54,041 million and a 9% reduction in underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) to US$23,892 million.
The latter was a touch short of the consensus estimate of US$24,024 million.
This appears to have overshadowed Rio Tinto's underlying earnings of US$11.8 billion and US$2.58 per share final dividend, which were either in line or a touch better than expected.
For the full year, Rio Tinto's dividend came in at US$4.20 per share, which is down 12% year on year.
Commenting on the result, Goldman Sachs said:
RIO reported 2023 underlying EBITDA/NPAT of US$23.9bn/US$11.8bn, in-line with our estimates and Visible Alpha Cons. The company generated an average ROCE of 20% in the year and generated nearly US$8bn of FCF. While all divisions were broadly in-line, there was a decent reduction in Primary aluminium costs. The final dividend of US$2.58/sh (75% payout) was in-line with our US$2.59 estimate taking the FY payout to 60%, at the top end of the 40-60% policy. Net debt of US$4.2bn was above our US$2.9bn estimate due to differences in leases and other investments. Capex came in at US$7.1bn in-line with guidance.
Should you invest?
Goldman believes that the Rio Tinto share price is good value at the current level.
Its analysts have retained their buy rating with a trimmed price target of $138.30. This implies potential upside of 12% based on where it trades today.
In addition, the broker is forecasting a US$4.40 per share dividend in FY 2024. This represents an attractive fully franked 5% dividend yield, bringing the total potential return to 17%.
