Factors impacting analyst estimates
There are two major factors driving the estimates for Vale SA (VALE). Going forward, its volumes will get a significant boost from iron ore volumes as its S11D project ramps up. This will also lower its overall iron ore unit costs.
These factors are positive for the company. However, analysts are still worried about the capital needed by the company to finance this project as well as its ability to maintain a strong balance sheet.
At a time when the market’s view on medium-term to long-term iron ore prices is bearish (SDS), analysts are still worried about a high capex (capital expenditure) requirement, especially given Vale’s high financial leverage.
Higher sales estimates
Wall Street analysts covering Vale are projecting sales of $27.0 billion for 2016. That implies a revenue change of 4.4% year-over-year. The recent strength in commodity prices has prompted analysts to raise the estimates for miners, including Vale.
Going forward, analysts are projecting higher sales revenue. Consensus estimates are projecting a rise in revenues of 5.2% for 2017 and 3.1% for 2018. Most of this growth is attributable to the startup of S11D, Vale’s expansion project. The project should increase Vale’s iron ore volumes as well as lower the company’s overall costs for producing iron ore.
EBITDA margin estimates
Analysts have significantly raised their EBITDA (earnings before interest, tax, depreciation, and amortization) estimates for Vale for 2016 and 2017. It comes on the back of strength in commodity prices and Vale’s cost-cutting measures. The estimates for 2016 imply a year-over-year change of 37.0%. EBITDA estimates for 2017, on the other hand, imply a change of -1.0%.
Analysts are also projecting higher EBITDA margins of 36.0% for 2016 compared to a margin of 26.0% for 2015. Margins are expected to expand going forward as volumes rise and costs shrink with S11D.
In fiscal 2Q17, NetApp’s Strategic Solutions business accounted for 62% of its net product revenues and rose 10% quarter-over-quarter to $439 million. NetApp stock has risen almost 27% since the company declared its fiscal 1Q17 results on August 17, 2016.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Kimberly-Clark (KMB) stock has risen 20.5% this year, boosted by the company’s better-than-expected sales and earnings during its last reported quarter. However, its stock could stop climbing. Here's why.