Zacks Investment Research downgraded shares of Rio Tinto plc. (RIO) from NEUTRAL to UNDERPERFORM on August 16, 2012, with a target price of $43.00.
We are holding a bearish view on Rio Tinto based on the slowdown in demand across the world, leading to a considerable sell-off in the future. The execution risks due to resource nationalism, governmental delays on mining permit issues and tax policies as well as natural disasters raise concern. The impact of higher energy and raw material cost alongside volatility of currency prices may affect margins and lower earnings. Moreover, a highly competitive metals and mineral market, increased resource competition and declining ore grades induce our bearish stance on the stock. However, we believe the company's cost-savings investments and divestiture programs will help combat the above headwinds in the near future.
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