metal miner Rio Tinto (NYSE: RIO) is up 7.8% since the reporting of the first half results at the end of July. Earnings fell 29% to $2.73 per share, while revenue fell 10% to $14.9 billion.
While that was actually a profit knock, the company also cut its dividend in response to lower iron ore prices on reduced orders from China, its largest customer. In addition, Rio Tinto cited the difficulty of finding employees, supply chain challenges and inflation as reasons for the lower dividend.
The profit decline was the result of lower sales prices for iron ore. While the company was able to achieve higher aluminum and mineral prices, higher operating costs offset these increases.
Despite mixed signals about the health of the company and the mining sector as a whole, analysts maintain a “hold” rating for the stock, according to data from MarketBeat analysts. The price target is $78, which would be an advantage of 27.91%.
On Monday, Turquoise Hill Sources (NYSE: TRQ) rejected Rio Tinto’s offer to buy a 49% stake in the gold and copper mine. Rio Tinto is already the majority shareholder of Turquoise Hill. Rio Tinto made the offer in March, hoping to take direct ownership of the huge Oyu Tolgoi copper gold mine of Turquoise Hill in Mongolia.
Rio Tinto is currently trading 23% below its April 18 high of $79.61. However, it rose 3.76% in the past week and 14.86% in the past month. Trading volume was 17% higher than normal for the week ending August 12, indicating institutional buying.
Strong tax management
Meanwhile, Australian mining giant BHP Group (NYSE: BHP) was 5.9% higher Tuesday, following the company’s full-year results for fiscal 2022. Wall Street was clearly pleased with the company’s strong fiscal management.
In addition to earning $8.42 a share, a year-over-year increase in It generated a record free cash flow of $24.3 billion.
BHP, whose operations include petroleum, copper, iron ore and coal, currently pays a dividend of $6 per share, for a dividend yield of 10.35%. That’s well above averages for mining companies, as well as for NYSE stocks as a whole, according to MarketBeat dividend data.
In its earnings report, BHP stated that earnings from continuing operations grew by 34% year-on-year. Free cash flow was $24.3 billion and the company also reduced its debt burden.
In a statement, CEO Mike Henry issued a global forecast for events that could affect the company’s operations.
“We expect China to emerge as a source of stability for commodity demand in the coming year, with policy support gradually taking hold,” he said. “At the same time, we expect a slowdown in advanced economies as monetary policy tightens, as well as continued geopolitical uncertainty and inflationary pressures. The direct and indirect effects of the European energy crisis are of particular concern. Tight labor markets will continue to be a challenge for global and local supply chains. Waves of COVID-19 infection continue to occur in the communities where we operate, and we are planning accordingly.”
Market-wide price increase
As a whole, the mining sector has received a boost in the past week following numerous earnings reports from prominent large caps.
For example, the Brazilian mining giant Vale (NYSE: VALE) also made a profit at the end of July and the stock has risen 1.5% since then. Earnings fell 11% to $1.32 per share on revenue of $11.2 billion, down 32%.
Nevertheless, the company announced a $3 billion shareholder distribution, slated for September. That comes on top of a previous buyback program totaling $8.3 billion.
Other good news was the company’s iron ore production, which is recovering from a dam disaster in Brazil that killed 270 people and caused major ecological damage. However, this week, Brazilian authorities fined the company $17 million. In the grand scheme of things, that fine is unlikely to cause much financial harm to Vale or its shareholders.
The miners certainly flash mixed messages when it comes to their fundamental strength. At the moment, despite recent upward trends after earnings, global uncertainty remains a risk for these stocks, even if a weak market rally continues.