Investec says increased shareholder returns possible at Rio Tinto

7th Aug 2014 10:37

Rio Tinto easily beat consensus estimates with its first-half results on Thursday, though Investec repeated its 'hold' recommendation for the stock on a valuation basis.Nevertheless, the broker said that shareholders could still see "increased returns" from 2015 after the miner's recent strong performance.Rio said underlying earnings rose 21% year-on-year to $5.1bn in the first half, compared with Investec's $4.78bn forecast and the consensus estimate of $4.7bn.Meanwhile, net debt was reduced by a "significant" $1.9bn to $16.1bn, while capital expenditure was reduced by $2bn to $9bn, Investec highlighted.Analyst Hunter Hillcoat said: "Rio Tinto's share price has performed well of late, particularly in light of the fall in the iron ore price, which at circa $95/tonne is at least $10/tonne below what consensus had forecast over this period. "Today's result demonstrates why the share price has performed well, with earnings ahead of expectations, capex guidance reduced and debt falling rapidly - all pointing to the possibility of increased returns for shareholders from next year."However, he said that the stock appears "fully valued" on a price-to-earnings basis.Investec has placed its target price under review for the stock, which was up 1.2% at 3,431p by 10:36.BC