The world of business is a riddle, wrapped in a mystery, inside an enigma. And there’s nothing like the anticipation of a company reporting its quarterly earnings to keep investors on the edge of their seats. Brazilian mining giant Vale S.A. VALE is set to unveil its fourth-quarter 2023 financial results after the market closes on February 22. The big question on everyone’s mind is, will Vale deliver a treasure trove of good news, or will it leave a sour taste in investors’ mouths?
Q4 Estimates
The Zacks Consensus Estimate for Vale’s fourth-quarter sales is projected to reach a whopping $12.95 billion, marking an 8.4% increase from the same period in the previous year. As for earnings, the consensus mark has surged 16% over the last 30 days and stands at a promising $1.04 per share. This suggests a 27% upturn from the year-ago quarter’s reported figure.
Q3 Results
In the previous quarter, Vale observed a decrease in earnings per share compared to the previous year, in spite of higher revenues. This decrease was largely attributable to rising costs and expenses. Nevertheless, fortune has been smiling on the company as it managed to outshine the Zacks Consensus Estimate for both its top and bottom lines.
In the last four quarters, VALE missed the consensus estimate twice and surpassed it on the other two occasions. The company has averaged a not-so-encouraging surprise of negative 12.99% in the trailing four quarters.
VALE S.A. Price and EPS Surprise
A visual representation of Vale’s performance shows a pattern of both hits and misses. The company’s stock chart paints a picture of its price and earnings per share surpises. But since we’re talking business and not art, let’s put a pin in this for now.
Factors to Note
Vale recently issued an update on its production in the final quarter of 2023. This could serve as a crystal ball into the company’s fortunes in the soon-to-be-reported quarter. Iron ore production for the period tallied approximately 89.4 million metric tons, marking an 11% year-over-year increase. This figure sailed well ahead of the Zacks Consensus Estimate of 83 million metric tons.
Iron ore fines and pellet sales maintained steady ground at 88.2 million metric tons in the fourth quarter, compared to the same period a year ago. Moreover, Vale reported an average realized iron ore fine price of $118.3 per ton in Q4, registering a robust 23.7% year-over-year increase, mainly thanks to soaring benchmark iron ore prices and a positive impact from forward price adjustments.
Vale’s Iron Solutions segment is accountable for almost 93% of the company’s revenues. The Zacks Consensus Estimate for iron ore revenues for the upcoming quarter stands at approximately $9.16 billion, signifying an 18% year-over-year surge, reflecting the buoyant prices. As for pellet revenues, the consensus mark stands at $1.6 billion, suggesting a 10% growth from the same quarter the previous year.
The clang of negative news, however, rings from the nickel sales, which saw a 17.7% year-over-year contraction to 47.9 thousand metric tons. The decline was principally a result of reduced production as the segment bore the brunt of the ongoing transitioning of Voisey’s Bay mine to underground operations and the planned furnace rebuild at Onça Puma. Despite this, the figure surpassed the consensus estimate of 45 thousand metric tons. Average realized nickel prices per ton dwindled by 24.7% year over year to $18,420 due to declining LME prices. The Zacks Consensus Estimate for nickel revenues for the quarter is $767 million.
Vale put 97.5 thousand metric tons of copper up for sale, marking a hefty 26% increase from the same quarter the previous year. The tally also crossed the Zacks Consensus Estimate of 69 thousand metric tons. The average realized price for copper operations alone (Salobo and Sossego) was $7,941 per ton for the quarter, a 9.5% drop year over year. The average realized copper price for all operations (including copper sales originating from nickel operations) stood at $7,867 per ton in Q4 2023. The consensus estimate for copper revenues is $1.03 billion.
Overall, Vale’s revenues in the fourth quarter likely echoed the surge in iron ore prices and improved copper volumes. However, this shine might have been dulled by a decrease in nickel sales volume and nickel prices, as well as a year-over-year fall in copper prices.
The company has been grappling with escalating input costs, particularly diesel and freight costs, over the past few quarters. This is expected to have laid a heavy anchor on its margins in the to-be-reported quarter. Nevertheless, Vale’s efforts to keep costs in check are expected to have cushioned some of this impact.
What the Zacks Model Unveils
Our trusted model foresees a win for Vale this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) improves the chances of an earnings beat, and that’s just the case here.
Earnings ESP: The Earnings ESP for Vale stands at a promising +3.91%. If you want an eagle-eyed glimpse at the best stocks before they are reported, you can rely on our Earnings ESP Filter.
Zacks Rank: The company currently boasts a Zacks Rank of 3.
Price Performance
Last year painted a dismal picture for Vale’s shares, which plummeted by a harsh 19.9%. This matches the gloom in the industry, where the company’s shares found themselves languishing.
Image Source: Zacks Investment Research
Other Stocks That Warrant a Look
For those who are searching for treasure in the basic materials space, our model offers a few nuggets worth panning for:
Eldorado Gold Corporation EGO, scheduled to release its earnings on February 22, has an Earnings ESP of +3.53% and a Zacks Rank of 2 at present. You can glean the complete list of today’s Zacks #1 Rank stocks here.
Market watchers are anticipating EGO’s fourth-quarter earnings to clock in at 21 cents per share, marking a 50% uptick from the prior year.
Franco-Nevada Corporation FNV, set to unfurl its fourth-quarter earnings on March 5, flaunts an Earnings ESP of +0.63%.
The Zacks Consensus Estimate for FNV’s fourth-quarter earnings currently stands at 80 cents per share, projecting a 7% dip from the same quarter in 2022. FNV currently boasts a Zacks Rank of 3.
Ero Copper ERO, poised to release its earnings on March 7, shows an Earnings ESP of +10.68% and a Zacks Rank of 3 at present.
The Zacks Consensus Estimate for ERO’s fourth-quarter earnings sits at 26 cents per share, marking an 8.3% year-over-year surge.
To keep your finger on the pulse of upcoming earnings announcements, turn to the Zacks Earnings Calendar.
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VALE S.A. (VALE) : Free Stock Analysis Report
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
Eldorado Gold Corporation (EGO) : Free Stock Analysis Report
Ero Copper Corp. (ERO) : Free Stock Analysis Report
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