What is Morgan’s updated view on Rio Tinto and BHP shares?

It has been a strong year thus far for Australia’s two largest blue-chip materials stocks Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP). 

Year to date, Rio Tinto and BHP shares are up 9% and 25% respectively. 

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up just 0.8% in the same period. 

Why are Rio Tinto and BHP shares soaring?

These shares have risen strongly this year because investors have become more optimistic about the mining sector. 

Higher prices for key commodities such as copper and resilient iron ore prices, driven by growing demand from AI infrastructure, data centres, electrification and renewable energy projects, have boosted earnings expectations. 

Both companies have also delivered solid production results and attracted investors looking for large, financially strong businesses with reliable dividends, helping push their share prices higher.

What is Morgan’s updated view on BHP shares?

At the end of last week, the team at Morgans provided fresh outlooks on both Rio Tinto and BHP shares. 

Looking at BHP shares, the broker said the mining giant ended FY26 on a good note, with an operational result largely in line with consensus and a touch ahead of our estimates in places. 

Normally a source of volatility, BHP’s coal operations posted decent consensus beats at both BMA and NSWEC. FY27 guidance appears steady relative to our existing estimates, although consensus appears high for group copper. Best-in-breed global diversified miner in what remains a healthy upcycle for resources. We maintain our HOLD rating and A$60.20 target price.

Rio Tinto remains posts healthy Q2

Looking at Rio Tinto shares, Morgans said the company posted a healthy Q2 where it matters. 

Pilbara shipments beat consensus (+2%), while Morgans said it sees the headline Simandou miss (-68% vs consensus) as a net positive: a slower Simandou ramp supports iron ore benchmarks, and each US$10/t on the benchmark is worth ~US$2.5bn of annual EBITDA to RIO’s far larger Pilbara business. 

The sting in the tail was Kennecott, with a late June converting furnace breach requiring a ~75-day full rebuild, hitting H2 refined copper and gold output (total copper including saleable matte unchanged). Copper C1 guidance halved to US30-50c/lb, on strong by-prod prices, a material margin tailwind into the H2 result. Trading back close to where we see fair value, RIO remains one of the highest quality global exposures to a sector enjoying a multi-year upcycle (albeit not without its volatility). We maintain our HOLD rating, A$163.00 TP (was A$165.00).

From last week’s closing price of $160.95, the updated price target is just 1.2% above current levels. 

The post What is Morgan’s updated view on Rio Tinto and BHP shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has positions in BHP Group. 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 BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.