Australian earnings preview – Fortescue

Australia

Full Year Earnings Preview:

Fortescue Metals Group Ltd (FMG) is an Australian iron ore production and exploration company with assets located in the Pilbara region of Western Australia. FMG is the fourth largest iron ore producer in the world after BHP Billiton, Rio Tinto, and Vale.

It reports its full-year numbers on the 24th of August.

Despite the crippling impact of the coronavirus on global industry, FMG has benefitted from the strong demand from China for iron ore, sparked by the government’s sizeable post-COVID-19 stimulus measures and supply disruptions in Brazil. FMG had promised to export no more than 175 million tons in the year to June 30, but a strong performance over the past nine months prompted it to upgrade that target to as much as 177 million tons.

FMG recently became net cash positive for the first time since it became an exporter in 2008. This represents a victory of sorts after the companies decade-long battle against a dangerously high debt load, following its near-death experience in September 2012, after iron ore prices slumped.

FMG is on track to deliver record exports, record profits, and is expected to announce a record dividend in August. FMG’s consensus statutory EPS estimates are 225 cents per share and it is expected to pay a dividend of 185 cents per share, which represents an ~10% dividend yield.

Technically, the share price of FMG has rallied strongly from its March low of $8.20, and recently made a new all-time high of $18.92, reflecting the high expectations for its full year results. On the downside, dips back to trendline support $16.00, are likely to be well supported in the current reflationary environment.

Australian earnings preview – Fortescue

Source Tradingview. The figures stated areas of the 19th of August 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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