Higher aluminium costs in North America and increased debt contributed to the downgrade
Rio Tinto is proceeding with divestment of non-core assets while maintaining 2026 guidance
📖 Full Retelling
Goldman Sachs downgraded Rio Tinto Plc. (NYSE:RIO) to Neutral from Buy and lowered its price target to GBP74.00 from GBP79.00 on February 23, 2026, citing cost pressures that impacted the mining giant's 2025 financial performance despite strong year-over-year growth. The $155.69 billion mining company reported underlying EBITDA of $25.4 billion and net profit of $10.9 billion for 2025, falling short of Goldman Sachs' estimates of $25.9 billion and $11.2 billion respectively, though representing a 9% increase from the previous year. Despite these misses, Rio Tinto trades at a P/E ratio of 15.72 and has delivered an impressive 62% return to investors over the past year, suggesting the market remains optimistic about the company's long-term prospects despite recent challenges. The downgrade comes as Rio Tinto faces multiple operational headwinds, including higher costs in North American aluminium operations that caused a $700 million shortfall in aluminium EBITDA, partially offset by a $400 million beat in copper performance. Additionally, the company's net debt reached $14.4 billion, exceeding the $12.9 billion estimate, driven by capital expenditure of $12.3 billion that surpassed the $11.4 billion forecast. In a further complication, the Mongolian Tax Authority issued Rio Tinto an additional tax assessment of approximately $440 million, bringing total possible additional tax payments to over $1 billion. Despite these challenges, Rio Tinto maintained its 2026 production and capital expenditure guidance, with its Pilbara unit cost guidance of $23.50 to $25.00 per ton aligning with Goldman Sachs' estimate of $24.30 per ton. The company has also begun market testing of its borates and titanium dioxide assets as part of a broader $5 billion to $10 billion non-core divestment strategy aimed at optimizing its portfolio. Following the announcement, Rio Tinto's stock experienced a pre-market decline of 3.4%, reflecting market concerns about the cost pressures, though according to InvestingPro, the company remains undervalued at current levels with a compelling 5.19% dividend yield.
The Goldman Sachs Group, Inc. ( SAKS) is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many international financial centers.
Goldman Sachs' downgrade of Rio Tinto signals growing concerns about cost pressures impacting profitability for one of the world's largest miners. This matters because Rio Tinto is a major player in global commodities, and its financial performance is a key indicator for the mining sector. The downgrade could influence investor sentiment and stock performance for other mining companies facing similar cost challenges.
Context & Background
Rio Tinto reported 2025 underlying EBITDA of $25.4B and net profit of $10.9B
Results missed Goldman Sachs estimates due to higher costs in North America aluminium operations
Net debt of $14.4B exceeded estimates, driven by higher capital expenditure
The company faces a potential $1B+ in additional tax payments from Mongolia
Rio Tinto trades at a P/E ratio of 15.72 with a 62% return over the past year
What Happens Next
Rio Tinto will proceed with its 2026 production and capital expenditure guidance as previously announced. The company will continue market testing for divestment of its borates and titanium dioxide assets as part of its $5B-$10B non-core asset sale program. Investors will monitor whether cost pressures ease and if the company can meet its operational targets for the coming year.
Frequently Asked Questions
Why did Goldman Sachs downgrade Rio Tinto?
Goldman Sachs downgraded Rio Tinto due to cost pressures that caused the company to miss earnings estimates, particularly in its aluminium business, and higher than expected net debt.
What is Rio Tinto's dividend yield?
Rio Tinto offers a dividend yield of 5.19% according to the InvestingPro data mentioned in the article.
What are the key factors affecting Rio Tinto's costs?
Key cost factors include higher expenses in North American primary metals operations, lower bauxite revenue, and a significant capital expenditure program that exceeded forecasts.
Original Source
try{ var _=i o; . if(!_||_&&typeof _==="object"&&_.expiry Gold prices extend gains on fresh Trump tariff jitters Can gold rise to new highs above $5,600 in 2026? Bitcoin slips after earlier gains amid tariff volatility Bull vs. bear argument on Friday’s Supreme Court tariff ruling (South Africa Philippines Nigeria) Goldman Sachs cuts Rio Tinto stock rating on cost pressures By Investing.com Analyst Ratings Published 02/23/2026, 03:21 AM Goldman Sachs cuts Rio Tinto stock rating on cost pressures 0 RIO 0.78% Investing.com - Goldman Sachs downgraded Rio Tinto Plc. (NYSE:RIO) to Neutral from Buy and lowered its price target to GBP74.00 from GBP79.00. Rio Tinto reported 2025 underlying EBITDA of $25.4 billion and net profit of $10.9 billion, missing Goldman Sachs estimates of $25.9 billion and $11.2 billion respectively. The results came in 1% below Visible Alpha Consensus Data, though EBITDA increased 9% year-over-year. Despite the miss, the $155.69 billion mining giant trades at a P/E ratio of 15.72 and has delivered a remarkable 62% return over the past year. Aluminium EBITDA missed estimates by approximately $700 million due to higher costs in North America primary metals and lower bauxite revenue. A $400 million beat in copper partially offset the aluminium shortfall. Net debt of $14.4 billion exceeded the firm’s $12.9 billion estimate, driven by capital expenditure of $12.3 billion that surpassed the $11.4 billion forecast. Rio Tinto maintained its 2026 production and capital expenditure guidance. The company’s Pilbara unit cost guidance of $23.50 to $25.00 per ton aligns with Goldman Sachs’ estimate of $24.30 per ton. The Mongolian Tax Authority issued Rio Tinto an additional tax assessment of approximately $440 million, bringing total possible additional tax payments to over $1 billion. The company has begun market testing of its borates and titanium dioxide assets as part of $5 billion to $10 billion in non-core divestments.According to InvestingPro , Rio Tinto...
