Fortescue shares dip as Bell Potter downgrades rating to 'sell'
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The news: Fortescue dipped on the ASX after Bell Potter downgraded its rating on the miner to 'sell', as its September quarterly report fell short of market forecasts.
The numbers: Fortescue shares were down 0.5% to $19.04 by 12:20pm AEDT, having closed 3.2% lower on Thursday.
Bell Potter downgraded Fortescue from 'hold' to 'sell' and cut its target price by 3% from $17.58 to $17.04. It also reduced its earnings per share forecasts by 19% in FY25, 10% in FY26 and 3% in FY27.
Bell Potter analyst David Coates noted that Fortescue's production was down 12% quarter over quarter, missing Bell Potter's forecast and tracking to the bottom of the miner's full-year guidance range.
Costs grew 9% on the prior quarter, above Bell Potter's forecasts and "measurably" above the top of Fortescue's FY25 guidance range.
The context: Coates described Fortescue's Q1 report as "a soft result", highlighting additional headwinds into FY25.
Price realisations have emerged as a concern across iron ore products, he said, particularly considering the higher quality of blend of iron ore production for the quarter.
What they said: "While we see potential for the iron ore price to be supported around current levels, this is factored into our forecasts," Coates said.
"However, lower production, higher costs, reduced price realisations and lower dividends reduce our earnings forecast and valuation."
The source: Bell Potter research
