Fortescue Ltd (ASX: FMG) shares have been in focus this week.
That's because the iron ore giant has released its results for FY 2025.
The reaction on the day wasn't overly positive, with its shares ending the day 4% lower at $19.22.
Let's now see what analysts at Bell Potter are saying about the miner.
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What is the broker saying?
Bell Potter acknowledges that Fortescue delivered a result a touch ahead of its low expectations.
However, it doesn't think this is anything to get excited about. Especially given its premium valuation and potential for increased capital expenditures and costs to weigh on its earnings and cash flow.
While it was a good result relative to our (low) expectations, we remain cautious on the outlook relative to the current valuation. In our view, the current share price reflects the recent uptick in the iron ore price, to which we see limited sustained upside. For FMG, guided CAPEX and Energy division costs remain elevated on a combined basis.
With further project delays (Pilbara Green Iron first production now 2026, from 2025), FID's pending on the Holmaneset and Pecém projects and a looming decarbonisation commitment to meet FMG's 'real zero' by 2030 target, we see upside risk to capital costs and downside risk to earnings and free cash flow.
Fortescue shares downgraded
In light of the above, Bell Potter thinks that investors should be selling the miner's shares.
According to the note, the broker has downgraded its shares to a sell rating (from hold) with a reduced price target of $17.05 (from $17.40).
Based on its current share price of $19.22, this implies potential downside of over 11% between now and this time next year. Though, with dividends the total return is closer to negative 6%.
Commenting on its sell recommendation, Bell Potter said:
EPS changes in this report are: FY26: -4%; FY27: -5% and FY28: -5%. FMG's core iron ore operations have outperformed and are on track to sustain these levels into FY26. However, we still forecast a lower iron ore price and declining earnings and dividends. Our NPV-based target price is lowered 2%, to $17.05/sh. With a TSR of – 6% from FMG's last closing price, we downgrade our recommendation to Sell.
EPS changes in this report are: FY26: -4%; FY27: -5% and FY28: -5%. Our NPV-based target price is lowered 2%, to $17.05/sh. With a TSR of -6% from FMG's last closing price, we downgrade our recommendation to sell.
