We are maintaining our Neutral recommendation on
) based on the optimism stemming from the worldwide demand upside
for metals and minerals owing to industrial development.
The industrial development is expected to drive growth in the
commercial market for miners like Vale, particularly on the back of
rising spot prices for metals and minerals. On this backdrop, we
believe that Vale's operational efficiency and mining development
will drive top-line growth. Moreover, investment in research and
development is expected to boost Vale's organic growth.
Vale focuses on volume growth of bulk material, which we believe
will certainly boost the company's sales in the coming quarters.
Its diversified product portfolio allows the company to maximize
the life of its mines over the long term. Moreover, Vale plans to
diversify further in areas of coal, copper and fertilizers, while
maintaining a competitive position in iron ore and nickel.
However, risk remains as we witness volatile international iron
ore market impacting the company's financials and dampening sales.
Moreover, competitive pricing, rising oil price and mining cost
inflation are also anticipated to affect margins. Uncertain market
movements may also dampen results of this cyclical stock.
Vale faces governmental delays on permits and tight
environmental regulations and policies. Mining and income taxation
on miners has also been threatening top-line results for quite
sometime. Natural disasters, abnormal rainfall, shortages of
skilled workers and destabilizing industrial infrastructure
continue to threaten stock performance.
Vale S.A. is one of the world's largest producers and exporters
of iron ore and pellets. The company keeps improvising its
competitiveness against rival companies, such as
Rio Tinto plc
BHP Billiton Ltd
Vale holds a Zacks #5 Rank, which translates into a short-term
(1-3 months) Strong Sell rating.
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VALE SA (VALE): Free Stock Analysis Report
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