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Vale (VALE) Gears Up to Report Q3 Earnings: What's in Store?

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Vale S.A VALE is scheduled to report third-quarter 2020 results on Oct 28, after the closing bell.

Q2 Results

Vale’s second-quarter earnings were flat year over year while revenues declined compared with the year-ago quarter. Meanwhile sales beat the Zacks Consensus Estimate, earnings missed the same.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter total sales is pegged at $10.8 billion, indicating growth of 6% from the year-ago quarter. The consensus mark for earnings currently stands at 72 cents, suggesting growth of 100% from the prior-year quarter. The estimate has gone down 11% over the past seven days.

The company has a trailing four-quarter negative earnings surprise of 7.7%, on average.

VALE S.A. Price and EPS Surprise

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 third-quarter-2020 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 increased 31% sequentially to 88.7 Mt in the quarter. The company attained a production record of 56.9 Mt in the third quarter in the Northern System, primarily driven by the S11D mine. In the Southern and Southeastern Systems, overall performance improved across operating units, particularly in the Itabira Complex and Timbopeba site.

Pellets production was 8.6 Mt in the reported quarter, reflecting a sequential rise of 21%. Sales volumes of iron ore fines and pellets were 74.2 Mt in the quarter, up 21% from the second quarter.

Iron ore prices have been rallying in the third quarter and gained around 30% year to date. Demand for the primary steelmaking commodity has increased on strong demand from China as steel production has gained 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. Higher iron production and rising iron prices are likely to have benefited the company’s performance in the quarter to be reported.  

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. The company has also been focusing on controlling costs. These efforts may get reflected in the third-quarter results.

What Does Our Model Say?

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 2.

Price Performance

In a year’s time, shares Vale have declined 2.7%, in line with the industry.

Stocks to Consider

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

Newmont Corporation NEM has an Earnings ESP of +2.24% and a Zacks Rank of 1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot Corporation CBT, currently a Zacks #2 Ranked stock, has an Earnings ESP of +12.50%.

Eastman Chemical Company EMN has a Zacks Rank #2 and an Earnings ESP of +3.46%, at present.

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VALE S.A. (VALE) : Free Stock Analysis Report
Newmont Corporation (NEM) : Free Stock Analysis Report
Cabot Corporation (CBT) : Free Stock Analysis Report
Eastman Chemical Company (EMN) : Free Stock Analysis Report
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