What Factors Are Driving Analysts’ Estimates for Vale SA?
Factors impacting Vale’s analyst estimates
Vale SA (VALE) stock significantly outperformed its peers in 1Q17. However, some negative factors led to weakness in the second quarter. Vale’s 2Q17 results were not very encouraging for investors, as its earnings dropped sharply from $1.1 billion in 2Q16 to $16.0 million in 2Q17.
To read more about Vale’s 2Q17 results in detail, please refer to These Factors Could Drive Vale’s 2H17 Performance.
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Compared to its close peers (XME), Vale has a large amount of debt on its books. Its capital expenditure program is still ongoing, while its peers—including BHP Billiton (BHP), Cliffs Natural Resources (CLF), and Rio Tinto (RIO)—seem to be finished with that phase for now.
The consensus revenue estimates for Vale SA (VALE) are $33.7 billion for 2017, for 23% growth year-over-year (or YoY). This growth is similar to what analysts are expecting for Rio Tinto and BHP, which we described previously in this series.
Higher commodity prices, especially those for iron ore, are behind this growth expectation. The implied revenue growth for 2018 and 2019 is much lower at -1.3% and 1.0%, respectively. Analysts seem to be expecting commodity prices to weaken going forward.
EBITDA margin estimates
Similar to its revenue growth for 2017, analysts are also expecting Vale’s EBITDA1 to grow 25.0% in 2017 to $15.2 billion. This implies a 45.0% margin for 2017 compared to 44.3% in 2016. The estimates for 2017 have also seen a downward revision of 3.0% in the past month, which is in line with the trend in sales estimates.
In the next article, we’ll take a closer look at Cleveland-Cliffs.
- earnings before interest, tax, depreciation, and amortization ↩