Fortescue or MinRes? Which beaten down ASX miner should you choose for your portfolio?

Fortescue (ASX: FMG) and Mineral Resources (ASX: MIN) have been two of the mainstays of the ASX resources sector for many years. Both are incredible WA success stories, riding the mining boom that has endured in some shape or form since the turn of the century.

As companies that operate in a highly cyclical industry, it is not uncommon to see FMG’s and MIN’s profits, and therefore their share prices, fluctuate with the prices of the commodities they produce. Sometimes profits are wildly up, producing super-sized share price gains – and sometimes profits wildly down, producing periods of prolonged underperformance.

This implies that if you can get the timing right – there are substantial profits to be made. The good news if you don’t happen to own either stock right now, is that each finds itself at the ebb stage rather than the flow stage of the current commodity price cycle.

Iron ore (FMG and MIN) and lithium (MIN) prices are in the doldrums, and this means that their profits are under pressure. The knock-on effects with respect to each company’s share price has been substantial. FMG is down around 40% from its 2024 peak of $29.95, and Mineral Resources at the sub-$40 prices it logged yesterday, is trading at less than half of its $79.76 peak set just 12 weeks ago.

FMG and MIN price charts last 12 months

Let’s assume for a second that you could only buy one of the two – and then assume it is indeed a bargain: Which would you buy? If you can’t decide, this article is for you. We’ve just processed the research updates on each stock that we’ve received from all of the major brokers that cover them. Here’s what they think: Buy, hold, or sell?

Fortescue: Buy, Hold, or Sell?

FY24 results overview

Revenue: +8% to US$18.22 billion vs consensus US$18.35 billion

Underlying EBITDA: +7% to US$10.7 billion vs consensus US$10.75 billion

Final Dividend: -11% to $0.89 @ 70% payout ratio, fully franked, for a total FY24 dividend of $1.97 fully franked (vs $1.75 fully franked in FY23)

Individual broker reactions:

Bell Potter: Upgraded⬆️ to HOLD from SELL | Target price: $17.58⬆️ vs $17.41

• “This is a solid result representative of FMG’s FY24 performance.”

• “We believe pressure will build on FMG’s margins. In the medium term, CAPEX on Fortescue Energy projects may also weigh on free cash flow. In the short-term we may see positives from iron ore pricing seasonality and stimulus measures in China, but overall risks remain to the downside for earnings and dividends.”

Macquarie: UNDERPERFORM | Target price: $14.25

• “We continue to expect FMG to come under FCF pressure over FY25-FY27”

• “We make modest EPS changes for FMG, holding our target at $14.25. Reiterate Underperform on declining div yields on below consensus Fe price deck”

Morgan Stanley: UNDERWEIGHT | Target price: $16.65⬇️ vs $18.10

• “We have reduced our bull case, which falls to A$26.20/sh, due to spot prices significantly below our base case forecast.”

Ord Minnett: Upgraded⬆️ to ACCUMULATE from HOLD | Target price: $20.00

• Underlying profit will be under increasing pressure due to rising costs, iron ore price decline, net debt may increase if company chooses to retain 70% dividend payout ratio

• Rating is upgraded on valuation grounds following share price fall

RBC Capital Markets: Upgraded⬆️ to SECTOR PERFORM from UNDERPERFORM | Target price: $20.00

• Broker expects stable iron ore fundamentals/seasonal demand support for iron ore price should sustain near-term earnings.

• Rating is upgraded on valuation grounds following share price fall

UBS: SELL | Target price: $17.30⬇️ vs $17.70

• “We have been Sell rated on FMG, having been cautious on the iron ore outlook and sceptical that the push into Green Energy (and capex step up in general) will deliver.”

Broker consensus rating and target price

Fortescue (FMG) Broker Consensus vs FY24 Results

The above table shows all ratings and targets for FMG from broker research notes since May 1 (to keep it current). To obtain FMG’s Broker Consensus Rating, we assigned a value of +1 to any rating better than HOLD/NEUTRAL/MARKETWEIGHT, a value of 0 for any rating equivalent to HOLD/NEUTRAL/MARKETWEIGHT, and a value of -1 to any rating worse than HOLD/NEUTRAL/MARKETWEIGHT.

We then take the average of all assigned rating values and assign a Broker Consensus Rating of BUY to average rating values greater than +0.5, a rating of HOLD for average rating values between -0.5 and +0.5, and a rating of SELL for average rating values less than -0.5.

Using this model, FMG’s average rating value is -0.25, up from -0.50 prior to its FY24 results, resulting in its Broker Consensus Rating remaining at HOLD.

FMG’s consensus (average) target price is $18.38, down 1.9% from $18.74 prior to its FY24 results. This suggests brokers believe the stock is around 0.7% undervalued based upon FMG’s share price at the time of writing of $18.24.

Mineral Resources: Buy, Hold, or Sell?

FY24 results overview

Revenue: +10% to $5.28 billion vs consensus $4.85 billion

Underlying EBITDA: -40% to $1.06 billion vs consensus $1.03 billion

Final dividend: No dividend declared for a total FY24 dividend of $0.20 fully franked (vs $1.90 fully franked in FY23)

Individual broker reactions

Citi: BUY | Target price: $55.00⬇️ vs $60.00

• Broker notes share price fall post-results due to market disappointment over higher than expected CAPEX and “weaker lithium metrics”

• “MIN is attractive on valuation but holders will need to look through a tough six months.”

Macquarie: NEUTRAL | Target price: $48.00⬇️ vs $60.00

• “A production pull back from Mt Marion was especially alarming considering the Ganfeng offtake and services margins at the mine.”

• “MIN's strategy to strengthen its balance sheet and flexibility to cut discretionary costs is a key focus. However, we see limited upside in the near term without commodity price help.”

• “We cut our TP by 20% to A$48ps with a lower production outlook and higher capex expected. Reiterate Neutral on a volatile base.”

Morgan Stanley: OVERWEIGHT | Target price: $70.00⬇️ vs $79.00

• “Despite lower cash generation in FY25 slowing the rate of the deleveraging, we still see MIN's transformation journey as one that is achievable with a reasonable buffer to weakness in commodity prices, leaving an equity raise unlikely at this stage. We see enough upside for LT investors.”

Morgans: ADD | Target price: $53.00⬇️ vs $67.00

• Long term fundamentals are intact despite short term challenges, the more conservative strategy in FY25, including significant cost cutting measures is necessary given the current downturn in market conditions

Consensus rating and target price

Mineral Resources (MIN) Broker Consensus vs FY24 Results

Using our same consensus model for MIN, its average rating value is +0.36, down from +0.43 prior to its FY24 results, resulting in its Broker Consensus Rating remaining at HOLD.

In light of there being a few possible outliers in MIN’s target prices we have one file, particularly from those brokers for which we have not yet received research updates (they can often take a few days to flow through), we present target price data in two formats here – median and average.

MIN’s average target price is $55.21, down a substantial 11% from $62.05 prior to its FY24 results. Using this method, this suggests brokers believe the stock is around 37.1% undervalued based upon MIN’s share price at the time of writing of $40.26.

MIN’s median target price is $51.00, down an even more substantial 15% from $60.00 prior to its FY24 results. Using this method, this suggests brokers believe the stock is around 26.7% undervalued based upon MIN’s share price at the time of writing of $40.26.

The verdict?

It’s a contentious one! Both stocks are consensus rated at HOLD, but MIN’s +0.36 Broker Consensus Rating value is superior to FMG’s -0.25. Neither stock appears to be providing brokers en-masse with a clear cut reason to recommend that their clients buy.

MIN appears to offer substantially more upside based upon consensus target prices, though, with brokers considering it potentially 26.7% undervalued compared to FMG’s 0.7%.

Keep in mind in both cases, that consensus ratings and price targets may change over the next few days as the brokers we have on file who have not yet updated their analysis do so. This is particularly likely in the case of MIN, given we have several brokers still to update who happen to have price targets substantially greater than where their peers have moved post results.