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Vale (VALE) to Report Q1 Earnings: What's in the Offing?

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Vale S.A (VALE - Free Report) is scheduled to report first-quarter 2021 results on Apr 26, after the closing bell.

Q1 Estimates

The Zacks Consensus Estimate for first-quarter total sales is pegged at $13.8 billion, indicating growth of 99% from the year-ago quarter. The consensus mark for earnings currently stands at $1.01, suggesting a whopping improvement of 1343% from the prior-year quarter. The estimate has gone down 6% over the past 30 days.

Q4 Results

Vale’s fourth-quarter earnings and revenues came in higher than the year-ago quarter and also beat the respective Zacks Consensus Estimate. This was driven by rising iron ore prices and sales volumes. The company has surpassed earnings estimates in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of 1.11%, on average.

 

VALE S.A. Price and EPS Surprise VALE S.A. Price and EPS Surprise

VALE S.A. price-eps-surprise | VALE S.A. Quote

Factors to Note

Vale recently provided first-quarter-2021 production update, which offered a sneak peek as to how the company is likely to fare in the to-be-reported quarter. Iron ore production for the first quarter of 2021 was 68 million tons (Mt), 14.2% higher than the year-ago quarter. The year-over-year improvement was aided by the gradual resumption of operations in Timbopeba, Fábrica and Vargem Grande complex throughout 2020, the restart of Serra Leste operations, and stronger performance in Serra Norte owing to lower rainfall in January. However, scheduled maintenances at the S11D mine and lower performance in the Itabira complex had a dampening impact.

The company’s pellet production was down 9% year over year to 6.3 Mt in the first quarter due to lower pellet feed availability from its sites, particularly Itabira and Brucutu. Sales volume of iron ore fines and pellets was up 11% to 65.6 Mt in the quarter under review.

Iron ore prices have been rallying in the first quarter as demand has been outstripping supply. Demand for the primary steelmaking commodity has been increasing this year on strong demand from China as steel production has been gaining steam in the country driven by its efforts to recover from the coronavirus-induced shutdown. This combined with persistent concerns over a supply shortage from Brazil, which has been hit hard by the COVID-19 pandemic, fueled the rally in iron ore prices. Iron generates around 80% of Vale’s revenues. Higher iron production and prices are likely to have benefited the company’s performance in the quarter to be reported.

With regard to base metals, which collectively contribute around 16% to the company’s revenues, production of nickel improved 6.8% year over year while copper, cobalt, manganese, coal and gold were down 19%, 40.5%, 74.9%, 44.5% and 31%, year over year, respectively. Higher nickel production and prices are likely to get reflected in the company’s results in the to-be-reported quarter. Higher year-over-year copper, cobalt and gold prices in the first quarter might have somewhat negated the impact of lower production for these metals.

Vale has been focusing on maintaining its ‘”value over volume” approach for the iron ore business. The company remains committed to delivering the highest possible margins by managing extensive supply chain and flexible product portfolio. It has also been focusing on controlling costs. These efforts might have favored the first-quarter performance.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Vale this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Vale is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Price Performance

In a year’s time, shares of Vale have gained 147.1%, compared with the industry’s rally of 143.9%.

Stocks Poised to Beat Estimates

Here are some Basic Materials stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Westlake Chemical Corporation (WLK - Free Report) has a Zacks Rank #1 and an Earnings ESP of +0.64%, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bunge Limited (BG - Free Report) , currently a Zacks #2 Ranked stock, has an Earnings ESP of +7.19%.

The Mosaic Company (MOS - Free Report) has an Earnings ESP of +3.06% and a Zacks Rank of 3, currently.

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