Analysts Are Updating Their Rio Tinto Group (LON:RIO) Estimates After Its Yearly Results

Rio Tinto Group (LON:RIO) came out with its full-year results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Rio Tinto Group beat revenue expectations by 3.4%, recording sales of US$63b. Statutory earnings per share (EPS) came in at US$12.95, some 3.3% short of analyst estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Rio Tinto Group

After the latest results, the consensus from Rio Tinto Group's 23 analysts is for revenues of US$52.9b in 2022, which would reflect a not inconsiderable 17% decline in sales compared to the last year of performance. Statutory earnings per share are forecast to tumble 28% to US$9.40 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$52.2b and earnings per share (EPS) of US$9.66 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£55.80, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Rio Tinto Group analyst has a price target of UK£69.03 per share, while the most pessimistic values it at UK£40.39. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Rio Tinto Group's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 17% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 9.9% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 4.3% per year. So it's pretty clear that Rio Tinto Group's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also made no changes to their revenue estimates, implying the business is not expected to experience any major impacts to the sales trajectory in the near term, even though sales are expected to trail the wider industry. The consensus price target held steady at UK£55.80, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Rio Tinto Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Rio Tinto Group going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Rio Tinto Group (1 is a bit concerning!) that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.