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Vale's (VALE) Q4 Earnings Surpass Estimates, Increase Y/Y

Zacks Equity Research

Mining giant Vale S.A. ’s VALE fourth-quarter 2018 earnings of 73 cents per share surpassed the Zacks Consensus Estimate of 62 cents. The reported figure also marked a substantial improvement from the 15 cents registered in the prior-year quarter.

For 2018, earnings came in at $1.32 per share, which lagged the Zacks Consensus Estimate of $1.45. However, the bottom line came in higher than the year-ago tally of $1.06 per share.


Net operating revenues rose 7% year over year to $9.8 million but fell short of the Zacks Consensus Estimate of $10.7 million.

VALE S.A. Price, Consensus and EPS Surprise

VALE S.A. Price, Consensus and EPS Surprise

VALE S.A. price-consensus-eps-surprise-chart | VALE S.A. Quote

Of the total net operating revenues, sales of ferrous minerals accounted for 77.9%, coal contributed 4.9%, base metals comprised 16.4%, and the remaining 0.7% was sourced miscellaneously.

Geographically, 11.2% of revenues were generated from South America, 58.5% from Asia, 4.5% from North America, 16.9% from Europe, 5.3% from the Middle East, and 3.6% from Rest of the World.

Net operating revenues for 2018 came in at $33.6 billion, up 8% from 2017. Revenues, however, missed the Zacks Consensus Estimate of $36.8 billion.

Operating Performance

In the fourth quarter, cost of goods sold totaled $5,752 million, down 0.7% year over year. Gross profit rose 20% year over year to $4,061 million. Gross margin came in at 41.4%, expanding 460 basis points (bps) year over year.

Selling, general and administrative expenditure increased 3.4% to $141 million, while research and development expenses surged 20% to $125 million, both on a year-over-year basis.

Adjusted operating profit was $3,699 million in the reported quarter, reflecting an 18% improvement from $3,133 million recorded in the prior-year quarter. Adjusted EBITDA improved 9% year over year to $4,467 million in the fourth quarter of 2018.

Balance Sheet & Cash Flow

Vale exited 2018 with cash and cash equivalents of $5,784 million compared with $4,328 million at 2017-end. Net debt at 2018 end stood at $9,650 million, down from $18,143 million at the end of 2017.

In 2018, net cash generated from operating activities totaled $15,330 million compared with $15,562 million recorded in the prior year. Capital spending summed $3,784 million in 2018 compared with $3,848 million in 2017.

Brumadinho Dam I Update

On Jan 25, 2019, there was a rupture at the Dam I in the Córrego do Feijão Mine in Brumadinho. The company has since been making serious efforts to mitigate the consequent damages. Vale is on track to determine the reasons behind this dam break. In the wake of the tailings dam break, Vale’s iron ore annual production was impacted by around 92.8 Mt per year.

In a year’s time, shares of Vale have dipped 0.4% compared with the industry’s 0.3% decline.

Zacks Rank & Other Stocks to Consider

Vale currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the Basic Materials sector are Ingevity Corporation NGVT, Innospec Inc. IOSP and Materion Corporation MTRN, each carrying a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here .

Ingevity has an expected earnings growth rate of 17.9% for 2019. Shares of the company have surged 42% in the past year.

Innospec has a projected earnings growth rate of 3.5% for the current year. The stock has rallied 21% in a year’s time.

Materion has an estimated earnings growth rate of 12.6% for 2019. The stock has gained 9% in the past year.

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