BHP VS Rio Tinto share price: where next as 2019 edges to a close?

As the price of iron ore remains volatile and as 2019 edges to a close, we examine the current outlook for BHP and Rio Tinto, as well as look at some of the recent results from both mining behemoths.

In broad terms, BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) are operationally quite similar: both count iron ore as a significant part of their overall financial performance and both have several auxiliary products that they also focus on.

In saying that, though both companies are operationally comparable, year-to-date the Rio Tinto share price has far outperformed BHP, rising 22.3% in that period. The BHP share price by comparison has risen just 10.3% YTD.

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Iron ore remains king

Though Rio Tinto and BHP have diverse operations between them – spanning: copper, petroleum, bauxite, aluminium and even diamonds – iron ore remains the cornerstone of both Groups. In FY19 for example, 48% of BHP's earnings (EBITDA) were derived from its iron ore business segment.

Comparing BHPs and Rio Tinto’s iron ore operations, we see that during the last quarter and on a 100% basis, Rio Tinto shipped 86.1 million tonnes of iron ore.

Rio Tinto also saw production get a boost in Q3, with Pilbara iron ore production hitting 87.3 million tonnes (+6% on a quarter-over-quarter basis) during the third quarter of FY19.

Commenting on the company’s 2019 full-year guidance, Rio Tinto’s management noted that guidance remains 'unchanged at between 320 and 330 million tonnes (100% basis), subject to weather’ conditions.

By comparison, BHP saw iron ore production decrease by 1% during its most recent quarter, producing '61 million tonnes or 69 million tonnes on a 100% basis.'

As BHP said in its most recent quarterly release:

'Guidance for the 2020 financial year remains unchanged between 242 and 253 Mt (273 and 286 Mt on a 100 percent basis.)'

BHP VS Rio Tinto share price: the analyst take

According to Bloomberg Data, analysts currently have two sell recommendations, 11 hold recommendations and five buy recommendations on BHP Group.

Looking at the bullish and bearish end of this spectrum, we see that Shaw and Partners have the highest share price target of $40.00 on BHP; while Evans & Partners have the lowest price target on BHP Group, with a $26.60 price target and a neutral rating.

Overall, the average 12-month analyst price target for BHP is $35.85m according to Bloomberg Data. At the time of writing, such a price target would imply a negative return of around 3.6%.

Secondly and in-line with Rio Tinto's year-to-date outperformance, analysts are also slighlty more optimistic on Rio Tinto's prospects moving forward. According to Bloomberg Data, as it stands RIO currently has eight buy recommendations, four hold recommendations and five sell recommendations.

All up, the company has an average 12-month price target of 90.10 per share. Of all the brokers covering RIO, Jefferies has the highest price target, slapping the stock with a $105.00 share price target.

Drawing a comparison – and though not the lowest broker price target – Evans & Partners have a neutral rating and a $73.00 share price target on the mining giant.