Australian earnings preview Rio Tinto

The Australian equities reporting season kicks off in earnest next week and it is promising to be the most interesting since the Global Financial Crisis, over a decade ago.

Charts (3)

The Covid-19 pandemic struck shortly after the February reporting season concluded. Since then lockdowns, implementation of travel restrictions, and a sharp rise in unemployment have dominated the economic landscape.

Many of Australia’s largest companies have been forced to the market to raise capital to shore up balance sheets. While others have been forced to defer, slash, or even cancel altogether the attractive dividend payouts that investors and retirees have come to rely upon.

Some companies have been able to weather the storm better than others, including iron ore producers Rio Tinto Ltd, Fortescue Metals Group Ltd. and BHP Group Ltd. who have benefitted from resilient demand from China as iron ore from rival suppliers in Brazil has been disrupted by Covid-19.

Investors will be able to get a better gauge on the outlook from this sector from Rio Tinto's half-year earnings report to be delivered on the 29th of July at 4.15pm Sydney time or 7.15am London time.

Rio Tinto half year earnings preview:

Rio Tinto Group is the world's second-largest metals and mining corporation, behind BHP, producing iron ore, copper, diamonds, gold, and uranium.

Iron ore typically accounts for 80% of Rio Tinto’s earnings and robust demand for iron ore from China has helped offset a sharp fall in industrial and economic activity in other regions as a result of the coronavirus pandemic.

The pandemic is expected to result in a sharp fall in Rio Tinto’s half-yearly earnings reported next week. However, with the market now more interested in the post coronavirus recovery punctuated by strong shipments and a rally in the price of iron to near U.S $110/ton, it is expected investors will mostly look through soft half yearly numbers and focus on full-year earnings.

Rio Tinto’s full-year earnings are expected to remain broadly flat in FY 2020 at around US$43bn, a remarkable result under the circumstances. Earnings per share (EPS) is expected to fall from US$636.3 cents per share in 2019 to around US$620.00 cents per share in 2020.   

Technically, Rio Tinto has found the layer of resistance near AU $108.00 formidable over the past 12 months and this remains the key resistance level to keep in mind. While on the downside, dips are likely to find support initially at near term support at AU$98.00, before medium-term support at AU$95.00.

Australian earnings preview - Rio Tinto

Source Tradingview. The figures stated areas of the 23rd of July 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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