uploads///Vale_Estimates

Why Analysts Expect Higher Earnings for Vale Going Forward

By

Dec. 31 2018, Updated 7:30 a.m. ET

Factors affecting analysts’ estimates for Vale

As of December 21, Vale (VALE) had returned 5.5% year-to-date. While the stock’s gains haven’t been much in absolute terms, it has outperformed most of its close peers. In the same period, Rio Tinto (RIO) has returned -9.8%, BHP (BHP) has returned 2.4%, and Freeport McMoran (FCX) and Glencore (GLNCY) have fallen 47.2% and 32.8%, respectively.

Vale’s prudent capital allocation strategy, change in governance practices, and focus on deleveraging and cost reduction have led to its stock’s outperformance in 2018.

Article continues below advertisement

Sales estimates

Analysts expect Vale to achieve revenue of $36.8 billion in 2018, implying an 8.2% increase YoY (year-over-year). This growth expectation has been supported by strong iron ore production growth and growth in other segments. Vale is particularly trying to increase production in its base metals (DBB) division to get ready for the electric vehicle (TSLA) revolution.

While its latest S11D project is expected to drive volume growth in the iron ore segment, the company is now focusing more on value versus volume, as it highlighted during its investor day. For more information, read Vale Day Update: What to Expect from Vale in 2019 and Beyond.

EBITDA margin estimates

Analysts also expect a significant 9.2% YoY jump in Vale’s 2018 EBITDA to $16.7 billion. This EBITDA estimate for Vale implies an earnings margin of 45.6%—slightly higher than its margin of 45.0% in 2017. The company’s margin is expected to slip to 44.5% in 2019 and 43.4% in 2020.

Advertisement

More From Market Realist

  • MP Materials mine
    Basic Materials
    MP Materials (MP) Is an Attractive Play on Rare Earths
  • Woman looking at data
    Basic Materials
    Should You Buy SLV Stock Before Another Silver Short Squeeze?
  • Freeport-McMoRan employee at a facility
    Basic Materials
    FCX Stock Is a Good Buy for Investors as Copper Prices Top $10,000
  • Alcoa logo
    Basic Materials
    Alcoa (AA) or CENX: Picking the Best Aluminum Stock
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.