We upgrade our rating on Vale S.A. (VALE) from Neutral to Outperform based on the rising iron-ore demand in China, world’s largest iron-ore importer, and the expectations of higher iron-ore price in fiscal 2011. A decrease in Indian exports also goes in favor of Vale.
We believe that the stock has a significant long-term upside potential due to the company’s position as a low-cost metal producer and also due to the improvement in the economic conditions. Vale’s huge capital budget of $24 billion in fiscal 2011 supports numerous strategic acquisitions, which are likely to be beneficial in the long run.
Further, Vale reported excellent results during the third quarter of fiscal 2010 with an EPADS of $1.13 compared with only $0.31 in the year-ago quarter. It also surpassed the Zacks Consensus Estimate of $1.03.
VALE RIO DO-ADR (VALE): Free Stock Analysis Report
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