Day: October 9, 2021

Why did the Rio Tinto share price struggle in the September 2021 quarter?

energy asx share price flat represented by worker in hi vis gear shrugging

In the quarter for the three months to 30 September 2021, the Rio Tinto Limited (ASX: RIO) share price has been struggling. What has been going on?

The September 2021 quarter represents the third quarter of Rio Tinto’s financial year because its financials align with the calendar year.

Between 1 July 2021 and 30 September 2021, Rio Tinto shares fell by just over 20%.

A few days after reporting its half-year result, the Rio Tinto share price actually reached a peak of $134.40. So, up until early August, it had actually risen during the quarter.

FY21 result

That half-year report actually included a lot of growth. Net operating cash generated jumped 143% to US$13.66 billion. Underlying earnings went up 156% to US$12.17 billion. Free cashflow surged 262% to US$10.18 billion. Reported net earnings soared 271% to US$12.3 billion.

All of that growth allowed the board to declare a total dividend per share of US$5.61 for the result, an increase of 262%. That included a special dividend per share of US$1.85.

Of the total underlying earnings, Rio Tinto generated US$10.2 billion of that from iron ore. The other two sizeable contributors were aluminium (US$921 million of net earnings) and copper (US$885 million of net earnings).

As readers can see, iron ore plays a big part in the profits (and dividend) of the business.

Looking at the six months to 30 June 2021, Rio Tinto said that the average realised price for its iron ore increased 97% to US$168.4 per dry metric tonne.

So, what may be hurting the Rio Tinto share price?

Whilst the miner benefited from the rising iron ore price during the first half of 2021. It appears to be suffering from the reversal of strength of iron. The iron ore price has roughly halved between May 2021 and now.

All things being equal, the lower iron ore price likely means Rio Tinto can’t generate quite as much profit.

Analysts may point to lots of different reasons for iron weakening such as the Evergrande crisis in China, steelmakers in China being told to reduce production and higher production coming back online in Brazil.

The iron ore price is certainly not at the lowest price it has been over the past decade, but it’s materially lower than where it was a few months ago.

What could help the Rio Tinto share price in the future?

Commodities like iron ore often move in cycles. Peaks and troughs could continue for iron ore.

Rio Tinto is also looking to diversify its earnings.

On 27 July, the board committed $2.4 billion of funding for the Jadar lithium-borates project in Serbia, one of the world’s largest greenfield lithium projects, subject to receiving all relevant approvals, permits and licences.

This lithium asset is expected to operate in the first quartile of the cost curve, with a 40-year mine life. First saleable production is expected to take place in mid-2026 at a time of strong market fundamentals with lithium demand forecast to grow 25% to 35% per year over the next decade.

Following ramp-up to full production in 2029, the mine is expected to produce approximately 58,000 tonnes of battery-grade lithium carbonate, 160,000 tonnes of boric acid and 255,000 tonnes of sodium sulphate annually.

Rio Tinto said that Jadar could supply all the necessary lithium to power over one million electric vehicles per year.

The post Why did the Rio Tinto share price struggle in the September 2021 quarter? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Rio Tinto right now?

Before you consider Rio Tinto, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Rio Tinto wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Could the NAB share price to hit $30 before the end of 2021?

A woman in a bright yellow jumper looks happily at her yellow piggy bank.

The National Australia Bank Ltd (ASX: NAB) share price was on form last week.

The banking giant’s shares rose almost 2% over the five days to end the period at $28.38.

This means the NAB share price is now up 24% since the start of the year.

Could the NAB share price hit $30.00 before the end of the year?

One leading broker that believes the NAB share price could rise further from here is Goldman Sachs.

A note out of the investment bank last week reveals that its analysts have retained their conviction buy rating and $30.62 price target on the bank’s shares.

Based on the current NAB share price, this implies potential upside of 7.9% over the next 12 months.

In addition, the broker is forecasting a fully franked $1.40 per share dividend in FY 2022. This represents a 4.9% dividend yield, which brings the total potential return to almost 13%.

Based on this, Goldman appears to believe there’s potential for the NAB share price to hit $30.00 by the end of the year.

What did the broker say?

NAB is the broker’s top pick among the major banks for a number of reasons. One of those is its cost management initiatives. It recently explained:

“i) NAB’s cost management initiatives, which seem further progressed relative to most of its peers, should drive productivity benefits sooner and free up investment spend to be directed more towards customer experience, as opposed to infrastructure (3Q21 update shows NAB is tracking well against this).”

Goldman also likes NAB due to its strong position in business banking. Its analysts commented:

“ii) given NAB’s position as the largest business bank and investment in its mortgage capability, we believe it is strongly positioned to benefit from the current recovery in both housing and commercial volumes (3Q21 update showed continued volume momentum).”

Finally, Goldman has been pleased with the way it manages its margins. It said:

“iii) NAB continues to effectively manage the balance between volumes and margins as well as any peer.”

The post Could the NAB share price to hit $30 before the end of 2021? appeared first on The Motley Fool Australia.

Should you invest $1,000 in NAB right now?

Before you consider NAB, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and NAB wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Top brokers name 3 ASX shares to sell next week

business man holding sign stating time to sell

Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Credit Suisse, its analysts have retained their underperform rating and $5.50 price target on this infant formula company’s shares. While it acknowledges that infant formula prices are stabilising, it isn’t enough for any changes to its rating. Particularly given its concerns over slowing birth rates in China and market share losses in stage 1 formula. The A2 Milk share price finished the week at $6.02.

Magellan Financial Group Ltd (ASX: MFG)

A note out of UBS reveals that its analysts have retained their sell rating and cut their price target on this fund manager’s shares to $29.00. This follows the release of another disappointing funds under management update, which revealed further fund outflows. The broker suspects this is being driven by the poor performance of its flagship Global Fund and fears that there could be further outflows to come. Particularly on the retail side due to its poor performance and high fees. The Magellan share price was trading at $33.90 at Friday’s close.

Unibail-Rodamco-Westfield CDI (ASX: URW)

Analysts at Ord Minnett have retained their sell rating and $4.00 price target on this shopping centre operator’s shares. While Ord Minnett notes that Unibail-Rodamco-Westfield’s shares have pulled back meaningfully in recent months. It still doesn’t see enough value in them to change its rating. Particularly given how it is yet to see proof that a rebound in trading conditions is taking place. As a result, it is holding firm with its sell rating for the time being. The Unibail-Rodamco-Westfield share price ended the week at $4.94 today.

The post Top brokers name 3 ASX shares to sell next week appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2 high quality ASX 200 shares named as buys

A man and woman put hands in the air as they dance in front of a green brick wall.

If you’re wanting to construct a balanced portfolio, owning a few ASX 200 shares could be a smart move.

But which ASX 200 shares should you buy? Two that could be in the buy zone are listed below:

Coles Group Ltd (ASX: COL)

The first ASX 200 share for investors to consider is Coles. It is one of the big two supermarket operators in the ANZ market. In addition to this, it has a number of complementary businesses such as its convenience stores, flybuys loyalty program, and Liquorland.

Due to the strength of these businesses and their positive long term outlooks, Coles has been tipped as an ASX share to buy. This is particularly the case for income investors due to its attractive yield and favourable dividend policy.

Morgans is positive on the company and is forecasting generous dividend payments in the coming years. Its analysts are expecting dividends per share of 61 cents in FY 2022 and 62 cents in FY 2022. Based on the current Coles share price of $17.03, this will mean fully franked yields of 3.6% and 3.65%, respectively, over the next two years.

Morgans has an add rating and $19.80 price target on its shares.

ResMed Inc. (ASX: RMD)

Another ASX 200 share to look at is ResMed. It is one of the world’s leading sleep treatment-focused medical device companies.

ResMed has been growing its revenue and earnings at a very strong rate over the last decade. This has been underpinned by its industry-leading products, growing software business, the increasing awareness of sleep disorders, and its investment in research and development (R&D).

Pleasingly, the company’s growth outlook remains very positive. This is thanks to its huge addressable market and the shift to home healthcare. The latter is being supported by its comprehensive out-of-hospital software platforms that allow people to stay healthy in the home or care setting of their choice.

Another positive is that one of its biggest rivals is currently battling with a major product recall. This is expected to allow ResMed to gain market share this year.

The team at Credit Suisse are very positive on the company. The broker currently has an outperform rating and $44.00 price target on its shares.

The post 2 high quality ASX 200 shares named as buys appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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