Rio Tinto Buy Maintained At Canaccord On The Back Of Iron Ore

In a report published Monday, Canaccord Genuity analyst Nick Hatch maintained a Buy rating on Rio Tinto Plc (ADR) RIO, while reducing the price target from 3530p to 3360p, on increased iron ore price forecasts. Analyst Nick Hatch said that increased iron ore prices are expected to boost Rio Tinto's 2015 earnings besides offsetting the negative impact of reduced shipments of iron ore, aluminum, Uranium and titanium oxide feedstock. The iron ore price forecast has been raised by 12 percent for 2015 from US$52/t to US$58/t. "This is key because iron ore represented c.70% of 2014 EBITDA, and remains the largest earnings contributor. We have also raised our H2 average price estimate from US$50/t to US $55/t (current price US$51/t). The US$6/t price increase to our estimate adds c.US $2bn to our 2015 EBITDA forecast," the report added. Changes in the prices of other commodities are, however, expected to reduce Rio Tinto's 2015 EBITDA by about US$300M, Hatch mentioned. Rio Tinto has guided to reduced iron ore shipments, weaker titanium dioxide feedstock and uranium shipments. These are expected to reduce the company's 2015 EBITDA guidance by around US$130M. The underlying EBITDA estimate for 2015 has been raised from US$11,092 million to US$12,662 million and the EPS estimate has been raised from 204c to 247c. Lower commodity prices in subsequent years are expected to result in reduced earnings estimates for the company, the report stated.