Stock Update
Momentum
Australia

Fortescue Metals Group Limited (FMG:ASX)

19 Feb 2020
By
Fortescue Metals Group Limited (FMG) surprised even the most optimistic analysts today with stronger than expected results…

Momentum Strategy holding FMG reported its interim numbers and while there weren’t any big surprises, the performance of the business is just staggering when one remembers that at one point it almost fell under the weight of a huge debt pile and sagging iron prices.

FMG posted a $US2.45bn half year profit which was above the $US2.3bn expected by analysts, and dramatically higher than the $US644m result posted in the same period of last year. Additionally, FMG will pay an interim dividend of $0.76 per share fully franked – a $1.086 grossed up dividend – which puts the stock on an absurd 19.5% grossed up yield if the company is able to maintain its current profitability and payout. The impact on iron ore prices from the coronavirus will likely play a role in determining FMG’s short-term profitability but given the high yield and low price/earnings multiple the stock is currently trading at, one can see that the consensus is for lower iron ore prices going forward. And if those forecasts prove conservative, then clearly there is upside ahead for FMG.

FMG remains a ‘hold‘, as part of the Momentum Strategy.

 

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