Rio Tinto Upgraded To Neutral By Goldman Sachs

Rio Tinto plc (ADR) RIO has seen a 23.3 percent decline in its share price since mid-April, as compared to a 14 percent decline in the ASX 100.

Goldman Sachs’ Craig Sainsbury upgraded the rating on the company from Sell to Neutral, with a price target of A$43.

Short-Term Positives

Sainsbury explained that the upgrade was based on the short-term outlook for iron ore, the company’s low debt levels and covered dividend yield of 3.6 percent in 2016.

Related Link: Citi Upgrades Rio Tinto From Sell To Neutral

“We continue to have a negative view of the iron price in the medium- and long-term but believe in the short term, Rio’s strong balance sheet and asset quality may offset future negative pricing outlook,” the analyst said.

At the current iron ore prices, Sainsbury believes there could be upside to Rio Tinto’s earnings, free cash flow and dividend.

“After the recent bounce in iron ore driven by a strong restocking cycle and higher then seasonal credit availability, we also believe that investors will potentially want to see the lower iron ore price before the stock underperforms,” Sainsbury added.