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Rio Tinto's (RIO) 2016 Earnings Up Y/Y, Outlook Positive

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Rio Tinto plc (RIO - Free Report) reported mixed full-year 2016 results. As of Feb 9, 2017, the company closed the trading session at $43.14 per share, up roughly 0.5%, post the release of full-year earnings results on Feb 8.

Over the last one month, shares of this Zacks Rank #3 (Hold) stock recorded a return of 5.24% – outperforming 2.03% return provided by the Mining-Miscellaneous industry.

Revenues and Earnings

At the end of the 2016, underlying earnings were $5.1 billion, up 12% year over year.

Underlying earnings came in at $2.83 per American Depositary Receipt (ADR) compared with $2.48 in the prior-year period. The upside was driven by reduced expenses during the year.

Consolidated sales for 2016 was $33.8 billion, down from $34.8 billion at the end of 2015. The year-over-year decline was primarily stemmed by lower average commodity prices and reduced market premia for aluminum.

Costs/Margins: Rio Tinto’s exploration and evaluation costs were $497 million as of Dec 31, 2016, down 13.7% year over year. Operating profit was $6.8 billion compared with $3.6 billion in the prior year.

Balance Sheet/Cash Flow: At the end of 2016, cash and cash equivalents were $8.2 billion as against $9.4 billion recorded at the end of 2015. Long-term borrowings and other financial liabilities were recorded at $17.5 billion compared with $21.1 billion at the end of 2015.

Net cash generated from operating activities in 2016 was $8.5 billion compared with $9.4 billion in the prior year. Capital expenditure decreased to $3 billion from $4.7 billion at the end of 2015.

In the first half of 2016, Rio Tinto paid dividends worth $2.7 billion and lowered its net debt to $9.6 billion.

Outlook: Rio Tinto is poised to grow on the back of product portfolio solidification, lucrative projects, solid balance sheet, increased cash flow generation and greater operational efficacy. The company also intends to provide higher value to shareholders on the back of lucrative dividend and share buyback programs.

By 2021, the company estimates to generate free cash flow worth $5 billion. Capital expenditure is anticipated to be around $5 billion by the end of 2017 and around $5.5 billion in each of 2018 and 2019.

Stocks to Consider

Some better-ranked stocks within the industry are listed below:

IAMGOLD Corporation (IAG - Free Report) has a positive average earnings surprise of 49.29% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albemarle Corporation (ALB - Free Report) has a positive average earnings surprise of 27.13% for the trailing four quarters and currently carries a Zacks Rank #2 (Buy).

Arconic Inc. also carries a Zacks Rank #2 and has a whopping positive average earnings surprise of 79.97% for the past four quarters.

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