Rio Tinto Plc. (RIO - Analyst Report) is set to report full year 2012 results on Feb 14. It reported dismal half year results earlier, with a year-over-year decrease in both revenue and earnings. Let’s see how things are shaping up for this announcement.
Growth Factors for the First Half 2012
Rio Tinto was badly affected by lower prices of most of the commodities in the first half 2012 along with a decline in demand among regions like China, Europe and the US. However, prices for gold, minerals and thermal coal saw a rise in the reported period. The company increased its iron ore production at the Pilbara ports and Rio Tinto Coal Australia. There was, however, a blow to Rio’s margins in the period due to an increase in the energy, fuel and diesel costs.
Our proven model does not conclusively show that Rio is likely to beat earnings this year. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Positive Zacks ESP: That is because the Most Accurate estimate stands at $4.93 while the Zacks Consensus Estimate is higher at $5.47. That is a difference of -9.9%.
Zacks Rank #3 (Hold): Rio’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks #3 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cliffs Natural Resources Inc. (CLF - Analyst Report) , Earnings ESP of 10.9% and Zacks Rank #2 (Buy).
Silvercrest Mines Inc. , Earnings ESP of 22.2% and Zacks Rank #2 (Buy).
Phillips 66 (PSX - Analyst Report) , Earnings ESP of 2.7% and Zacks Rank #2 (Buy).