Can Vale Expect Significant Upside after 4Q17 Results?



Vale’s 4Q17 results

Vale SA (VALE) released its 4Q17 results on February 27 after the markets closed. and held its earnings conference call the next day to discuss the results. While the company’s 4Q17 net profit rose 47% year-over-year (or YoY), its earnings per share (or EPS) of $0.36 missed analysts’ expectations by $0.07. Its revenues of $9.17 billion, on the other hand, beat market expectations by $100 million.

Higher iron ore and base metals (COMT) prices boosted Vale’s profitability, but higher costs and foreign exchange–related losses led to the miner missing consensus estimates.

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Vale’s price performance                 

Vale’s stock was down 5.2% on February 28 as a reaction to the miss on earnings expectations. Year-to-date, however, its stock has significantly outperformed its peers. As of March 1, Vale’s stock had returned 12.1%. In comparison, BHP (BHP), Rio Tinto (RIO), and Cleveland-Cliffs (CLF) have returned 0.4%, -0.2%, and 0.6%. One of the reasons for the stock’s outperformance is its higher reliance on iron ore, which has seen impressive gains this year.

In this series

In this series, we’ll see how Vale is planning to deal with the current volatile commodity price environment. We’ll also discuss the performance of its different segments in 4Q17, analyze the outlook, and discuss the steps the company is undertaking to reduce its debt—still one of the biggest investor concerns for the stock.

We’ll continue the next part of this series (below) with a look at Vale’s Iron Ore division.


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