After Tough 2022 Results, What’s Next For Rio Stock?

+8.51%
Upside
68.52
Market
74.35
Trefis
RIO: Rio Tinto logo
RIO
Rio Tinto

The shares of diversified mining giant Rio Tinto (NYSE: RIO) have gained almost 4% since early 2023, roughly in line with the S&P 500. The company recently posted earnings for Q4 and FY’22, with revenue for the full year declining by 12% to $55.6 billion, due to weaker price realizations for iron ore (down by about 26% year-over-year) and also due to sluggish shipments, amid weak demand from China. Rio’s adjusted earnings also declined by about 38% year-over-year to $13.3 billion partly due to higher energy prices. However, things could get better this year. The price of iron ore, which is its single largest product, accounting for two-thirds of Rio Tinto revenue, has been trending higher. Iron ore 62% Fe CFR futures have risen from around $79 per ton in early November 2022 to about $111 in early January, with prices surging further to about $127 per ton currently. The gains come as China eases some of its Covid-19 rules, signaling a revival in demand for steel and steel-making inputs, given that the country is the world’s largest consumer. Manufacturing activity has also picked up, with the Chinese manufacturing purchasing managers’ index (PMI) rising to 52.6 last month, the highest level since 2012, and up from around 50 in the previous month.

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 Returns Mar 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 RIO Return 6% 4% 92%
 S&P 500 Return 0% 4% 78%
 Trefis Multi-Strategy Portfolio 1% 8% 241%

[1] Month-to-date and year-to-date as of 3/3/2023
[2] Cumulative total returns since the end of 2016

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