Vale S.A (VALE) will report its fourth-quarter and fiscal 2011 earnings on Wednesday, February 15, 2012 after market closes.
The current Zacks Consensus Estimate for earnings per share (EPS) is $1.08, representing an annualized decline of 3.77%.
With respect to earnings surprises, over the trailing four quarters, Vale underperformed in three consecutive quarters and was in line in the remaining. The average earnings surprise was a negative 14.93%, implying that the company has underperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Third Quarter Highlights
Vale S.A. released its financial results for the third quarter of 2011. The company’s net earnings in the quarter were $0.94 per ADR, on a fully diluted basis, down 16.8% from $1.13 per ADR in the year-ago quarter, missing the Zacks Consensus Estimate of $1.31 per ADR. Earnings suffered a non-cash impact of $2.9 billion due to the depreciation of the Brazilian real, against the US dollar.
Gross operating revenue jumped 15.5% year over year to $16,741 million, registering a sequential growth of 9.1%. Production of iron ore, pellets, copper and thermal coal reached an all-time highs as witnessed during sales volume growth of bulk material, fueling the rise in operating revenue. The recorded revenue however missed the Zacks Consensus Estimate of $17,631 million.
Agreement of Estimate Revisions
In the last 30 days, none of the analyst providing estimates increased or decreased the company’s earnings per share (EPS) estimate for the fourth quarter of fiscal 2011. One analyst decreased the EPS estimate for the next quarter in the last 30 days. For fiscal 2011, one analyst decreased its estimate and two followed similar trend for fiscal 2012.
Magnitude of Estimate Revisions
Estimates over the last 30 days remained static at $1.08 per share for the fourth quarter of 2011, representing a year-over-year decline of 3.77%.
Estimate for fiscal 2011 decreased marginally from $4.47 to $4.44 over the last 30 days while that for fiscal 2012 showed a similar trend dropping from $3.98 to $3.85. These estimates represented a year-over-year growth of 36.64% for 2011 and a decline of 13.36% for 2012.
Our Take
We are holding a cautious outlook on Vale based on the vulnerability of worldwide rise in oil and raw material prices. Moreover, political uncertainty and regulatory delays in Brazil have been continuing to pose potential risk to the stock. Operational inefficiency due to natural disasters alongside fluctuating demand may also not be overlooked.
Brazil-based 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 like Rio Tinto plc (RIO) and BHP Billiton Ltd (BHP).
We currently maintain a long-term Neutral recommendation on the stock. Vale has a Zacks # 3 Rank, which translates into a short-term Hold rating (1-3 months).
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