Vale S.A. (VALE) is positioned to take advantage of increased commodities demand as the global recovery accelerates. VALE is trading at 12.2x forward earnings, well under the forward P/E for the S&P 500 which is 15.1.

Brazilian-based Vale is one of the world’s mining giants, with operations in more than 30 countries. It is the largest producer of iron ore and pellets, raw materials for the steel industry and one of the largest producers of nickel.

It also produces a host of other metals and commodities including copper, alumina, aluminum and coal.

Recently, the company acquired the Brazilian fertilizer assets of agriculture giant Bunge which expanded its potash and phosphate position. Vale’s goal is to be one of the largest producers of fertilizer nutrients in the world by 2017.

Bullish Commodities Story in 2010

I love the commodity story as the global economy reflates. Commodity prices are well off their lows of last year across the board, but especially in the metals. Copper, for instance, has doubled in the last year. That bodes well for these large global miners.

On Feb 11, when the company reported fourth quarter and 2009 results, it was already seeing a strong uptick in demand for iron ore.

“Europe is recovering faster than expected, Japan is at pre-crisis levels, and China has more demand than it did before the crisis,” said Executive Director for Ferrous Minerals, Jose Carlos Martins.

2010 Zacks Consensus Estimates Jumping Along with Commodity Prices

You can see the enthusiasm of the analysts in the 2010 Zacks Consensus Estimate. 10 estimates have moved higher in the last month as the Zacks Consensus has jumped 27.8% to $2.62 from $2.05 per share in that time period.

Analysts are projecting earnings growth of 161.4% in 2010.

No broker has a sell or a strong sell on the stock. There are currently 9 strong buys, 3 buys and 4 holds.

Vale is a Zacks #1 Rank (strong buy) stock.

Outlook on First Quarter Results

Vale is scheduled to report first quarter earnings results on May 5. The Zacks Consensus is up a penny to 31 cents in the last 30 days.

Vale doesn’t have the greatest track record in recent quarters of surprising on estimates, having missed the last 3 quarters. We’ll soon see if the company can turn it around this quarter.

You can see its longer term earnings surprise track record below.



In addition to a low P/E ratio, Vale also sports a price-to-book ratio of 2.6, which is in the value parameters of under 3.0.

The company has an outstanding 4-year average return on equity of 42.1%. Vale also pays a dividend, currently yielding 1.4%.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service.

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