How high does Macquarie think Fortescue shares will go?

Fortescue Ltd (ASX: FMG) has been in the news for all the wrong reasons recently, with a class action launched against the company and a $150 million judgment against it for cultural damage at sites in Western Australia’s Pilbara region.

Fortescue’s mining operations ticking along

On the operational front, however, the company is delivering solid results and is also looking to invest US$680 million in new green energy infrastructure to support its mining operations, as well as potentially data centres.

Macquarie has recently run the ruler over the company and has reaffirmed its outperform rating on the company’s shares with a positive share price target, which we’ll get to shortly.

Firstly, let’s have a closer look at the company’s most recent production report.

The company in April said it had shipped 48.4 million tonnes of iron ore in the third quarter, bringing the total amount shipped over nine months to 148.7 million tonnes, up 4% over the same period the previous year.

Fortescue Metals and Operations Chief Executive Officer Dino Otranto said at the time:

We delivered a solid quarter, contributing to record shipments of 148.7 million tonnes for the nine months to March. That reflects a significant effort from the team right across the business. At the same time, we’re getting on with decarbonising our operations and we’re already seeing the benefits. Given volatility in global energy markets, there’s never been a clearer reason why this matters. For us, it’s about strengthening energy security, lowering costs and eliminating emissions. The build-out of our green grid is well underway, with 630MW of solar and 133MW of wind generation under construction. As we bring this online, we’re fundamentally reshaping how we power our operations by cutting our reliance on fossil fuels, at a time when energy supply is increasingly uncertain.    

Meanwhile, the class action brought against the company relates to allegations including sexual harassment and sex discrimination.

Fortescue shares still looking like good value

Macquarie said it was expecting Fortescue to ship 53 million tonnes in the fourth quarter, and is also expecting the company to release an optimisation study in the next few months.

Macquarie said:

We expect an in line result at the quarterly, with FY27 guidance the key item of focus; we could see the first signs of the Hematite over magnetite strategy come through in volume guidance, with the outcomes of the portfolio optimisation study potentially occurring later in the year.

Macquarie has a 12-month price target of $21 on Fortescue shares, compared to $18.47 currently.

Including the company’s 6.5% dividend yield, this would equate to a total shareholder return of 17%.

Morgan Stanley has a dissenting view on Fortescue shares, with a sell rating and a price target of $17.25 on the company.

The post How high does Macquarie think Fortescue shares will go? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.