Next week is a big one for Aussie investors with a large number of big results releases.
Among them is Rio Tinto Ltd (ASX: RIO), which will be releasing its full year results.
If you are one of the many owners of Rio Tinto shares, then read on to see what the market is expecting from the mining giant's results on 20 February.
Rio Tinto FY 2024 results preview
As I mentioned above, Rio Tinto will be releasing its full year results on 20 February. This is because it operates with a financial year than runs from the start of January through to the end of December.
According to a note out of Goldman Sachs, its analysts are forecasting an operating profit just ahead of consensus estimates for the year.
The broker has pencilled in an underlying EBITDA of US$23.8 billion for the 12 months. This is broadly flat year on year and is just a touch higher than the consensus estimate of US$23.62 billion.
On the bottom line, the broker is forecasting a 10% decline in underlying earnings to US$10.6 billion. This time around, this forecast is below the consensus estimate of US$10.99 billion.
Goldman expects this to underpin a fully franked final dividend of US$1.93 per share, bringing its full year dividend to US$3.70 per share. The consensus estimate is for a full year dividend of US$3.68 per share.
Should you buy Rio Tinto shares?
Goldman Sachs is feeling bullish about Rio Tinto and is tipping its shares as a buy at current levels.
The note reveals that the broker has a buy rating and $146.20 price target on its shares. Based on its current share price of $121.63, this implies potential upside of 20% for investors over the next 12 months.
It also expects a 5.3% dividend yield in FY 2025, bringing the total potential return to approximately 25%.
Commenting on its buy recommendation, Goldman Sachs said:
Relative valuation: trading at c. ~0.7x NAV (A$163.2/sh) vs. peers (BHP ~0.8x NAV and FMG ~1.1x NAV) and c. ~5x NTM EBITDA at GSe base case, below the historical average of ~6-7x.
Attractive FCF and dividend yield + GS bullish copper and aluminium (EBITDA increasing to 45-50% by 2026E): FCF/dividend yield in 2025E (c. 5%/5% yield) & 2026E (c. 7%/6% yield) driven by our bullish view on aluminium and copper (~45-50% of group EBITDA by 2026E).
Strong production growth in 2025E & 2026E: RIO is a FCF and production growth story in our view, with forecast Cu Eq production growth of ~3-6% in 2025 & 2026 driven mostly by the ramp-up of the Oyu Tolgoi UG copper mine & a recovery at Escondida, higher Pilbara Fe shipments with the ramp-up of new mines, and a rebound in aluminium production.
All in all, this could make Rio Tinto worth considering if you are looking for mining sector exposure.
