RIO's Q3 Iron Ore Shipments Up 6% Sequentially: How to Play the Stock?

Core Insights - Rio Tinto reported stable iron ore shipments of 84.3 million tons in Q3 2025, flat year-over-year but a 6% increase sequentially, marking the second-highest Q3 performance since 2019 [1] - The company expects Pilbara iron ore shipments for 2025 to be between 323 million tons and 338 million tons, indicating a potential year-over-year decline of 2% to growth of 3% [5] - Analysts have raised earnings estimates for 2025-2026, reflecting improving sentiment towards Rio Tinto [9] Production Highlights - Bauxite production increased by 9% year-over-year to 16.4 million tons in Q3 2025, achieving a production record [3] - Aluminum output rose by 6% year-over-year to 0.86 million tons, while alumina output increased by 7% year-over-year to 1.9 million tons [3] - Copper production reached 204 thousand tons, a 10% increase year-over-year, with record production at Oyu Tolgoi [4] Production Guidance - Rio Tinto's bauxite production target for 2025 is revised to 59-61 million tons, up from 57-59 million tons, reflecting higher utilization rates [6] - Copper production is expected to be near the high end of the range of 780-850 thousand tons for 2025, driven by strong performance at Oyu Tolgoi [7] Financial Estimates - The Zacks Consensus Estimate for Rio Tinto's 2025 revenues is $54.90 billion, a 1.6% year-over-year increase, while earnings are projected at $6.09 per share, indicating a 9.1% decline [8] - For 2026, revenue estimates suggest a 3.72% year-over-year increase to $56.94 billion, with earnings projected to grow by 4.6% to $6.37 per share [10][11] Stock Performance - Year-to-date, Rio Tinto shares have gained 21.6%, lagging behind the industry's 26.5% growth [13] - The company operates across 35 countries with a diversified portfolio, focusing on new projects to support energy transition [15] Lithium Expansion - Rio Tinto is expanding its lithium portfolio to meet rising demand for batteries and electric vehicles, aiming to grow its capacity to over 200 thousand tons per year of lithium carbonate equivalent by 2028 [16] Valuation - Rio Tinto trades at a forward price-to-earnings multiple of 11.23, lower than the industry average of 16.43, indicating an attractive valuation [17] Investment Outlook - Despite potential operational headwinds, Rio Tinto's diversified portfolio and project pipeline position it well for future growth, supported by upward earnings revisions and attractive valuation [19]