On Friday, RBC Capital adjusted its outlook on Fortescue Metals Group (OTC:FSUGY) Ltd. (FMG:AU) (OTC: FSUGY) shares, reducing the price target from AUD21.00 to AUD20.00, while keeping an Underperform rating on the stock.
The revision follows Fortescue's fiscal year-end report, which highlighted record shipments for the fourth quarter of FY24 but also pointed out challenges that affected the firm's financial projections.
The company's earnings per share (EPS) estimates for FY24 were decreased due to weaker realized pricing and ongoing operational issues at its Iron Bridge project. Additionally, Fortescue provided its first guidance for FY25, which was largely as expected, except for an uptick in unit costs. This increase is attributed to higher strip ratios, now at 1.6 times, and inflationary pressures, prompting a reduction in EPS estimates for FY25.
Fortescue's report also confirmed that there will be no changes to its green hydrogen strategy. The company is expected to bring forward the final investment decision (FID) on its Holmaneset project in Norway and the Pecem project in Brazil within the next year. This strategic move aligns with Fortescue's ongoing commitment to green energy initiatives.
The new price target reflects a one-dollar decrease from the previous target, maintaining the Underperform rating. This adjustment incorporates the latest financial results and the challenges anticipated in the coming fiscal year. Fortescue's performance and strategic decisions in the face of increased costs and inflation will continue to be monitored by investors and market analysts.
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