Neutral Stance on Vale - Analyst Blog
March 12 2013 - 9:20AM
Zacks
On Mar 11, we reaffirmed our
Neutral recommendation on the mining giant, Vale
S.A. (VALE), since we are optimistic about the company’s
cost saving initiatives despite the weak results.
Why the Neutral
Stance?
Though Vale’s fourth-quarter
results (announced on Feb 27) missed both the Zacks Consensus
Estimate and the prior quarter’s earnings, its earnings for full
year 2012 beat the Zacks Consensus Estimate. A weak global economy
coupled with low prices for most of its products severely impacted
revenue.
Revenue was also hurt by a lower
production of pellets, ferroalloys, manganese ore, nickel, copper,
potash and nitrogen, which offset the increase in production of
iron-ore, coal and phosphates.
Over the last 30 days, only a few
of the estimates have been revised upwards for 2013 and 2014,
showing optimism about the cost saving measures undertaken by Vale.
However, there still seems to be skepticism relating to the recent
results. The revision has led to an increase of 3.1% to $2.31 per
share in the Zacks Consensus Estimate for 2013. However, the
estimate has gone down by 1.8% to $2.73 per share. Vale currently
holds a Zacks Rank #3 (Hold).
However, Vale’s continuous efforts
to curtail costs are paying off well. It has been divesting its
non-profitable and low margin assets and has plans to continue to
do so in the near future. The company has been taking steps like
CORe project in Sudbury, leading to lower operational costs and
using hydrometallurgical flowsheet, which enhances efficiency and
reduces wastage and costs.
Other Stocks to
Consider
Other stocks in the mining domain
that are presently doing well include
UR-Energy Inc. (URG),
Uranerz Energy Corp. (URZ) and Paramount
Gold and Silver Corp (PZG); each carrying a Zacks Rank #2
(Buy).
PARAMOUNT GOLD (PZG): Get Free Report
UR-ENERGY INC (URG): Free Stock Analysis Report
URANERZ ENERGY (URZ): Free Stock Analysis Report
VALE SA (VALE): Free Stock Analysis Report
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