On Tuesday, Citi analyst Paul McTaggart upgraded Fortescue Metals Group Ltd . (FMG:AU) (OTC: OTC:FSUGY) stock rating from Neutral to Buy, maintaining a price target of AUD17.50. The upgrade aligns with InvestingPro analysis, which shows the stock as undervalued with a GREAT financial health score. McTaggart’s assessment followed Fortescue’s March quarter performance, which showcased strong cost management, with C1 cash costs at US$17.50 per wet metric tonne (wmt). Despite the company’s hematite and concentrate price realisations being slightly lower than anticipated, the firm’s financial discipline was noted.
Fortescue’s net debt increased marginally to US$2.1 billion from US$2.0 billion at the end of the December quarter. The company maintains a moderate debt level with a debt-to-equity ratio of 0.28, while its current ratio of 2.7 indicates strong liquidity. This rise was partly attributed to the acquisition of Red Hawk Mining for A$254 million during the March quarter. McTaggart also expressed a desire to see a more rapid reduction in the company’s non-mining capital expenditures. InvestingPro subscribers can access 10+ additional financial health indicators and exclusive insights.
In terms of production, Iron Bridge’s shipments remained low, totaling just 1.5 million tonnes in the March quarter. However, the company’s guidance for fiscal year 2025 has remained unchanged. Adjustments to FY25 EBITDA/NPAT and discounted cash flow (DCF) were described as minimal.
The upgrade comes after Fortescue’s shares experienced a 17% decline over the past three months, which contrasts with the relatively stable performance of its peers, BHP and RIO Ltd, which saw decreases of around 2% in the same period. McTaggart highlighted that Fortescue is currently trading at 0.74 times its DCF.
Citi’s unchanged price target of AUD17.50 and the upgrade to a Buy rating reflect a positive outlook for Fortescue Metals Group’s stock, despite the recent downturn in share price relative to its industry counterparts.
In other recent news, UBS analysts have upgraded their rating for Fortescue Metals Group Ltd. from Sell to Neutral. This change in stance comes with a revised price target of AUD16.70, down from the previous target of AUD17.30. The adjustment follows Fortescue’s shares trading below their former price target. UBS analysts have slightly lowered their earnings per share (EPS) estimates for Fortescue by 3-6% for the fiscal years 2025 to 2027. This revision in EPS estimates has contributed to the decreased price target for the company’s shares. UBS believes concerns about iron ore prices are exaggerated, predicting stabilization between US$90 and US$100 per tonne over the next five years. They also consider worries about discounts on lower-grade iron ore to be overstated, though they have increased the discount rate for low-grade iron ore to 16%. The decision to upgrade Fortescue’s rating to Neutral reflects UBS’s balanced view of the company’s prospects amid these developments.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.