Vale S.A. (VALE) Q1 Earnings In Line, Revenues Miss Estimates
Mining giant Vale S.A. VALE reported in-line earnings for first-quarter 2018.
Earnings/Revenues
Quarterly earnings came in at 37 cents per share, lower than the year-ago tally of 40 cents. However, the bottom line came in line with the Zacks Consensus Estimate, and a penny higher than the prior-quarter figure.
Net operating revenues inched up 1% year over year to $8,603 million in the quarter, primarily on the back of higher Base Metal’s sales prices and increased sales volume of Ferrous Minerals.
However, the top line missed the Zacks Consensus Estimate by 2.5% and even slipped 6.2% sequentially.
Of the total net operating revenues, sales of ferrous minerals accounted for 75.9%, coal contributed 4.4%, base metals comprised 19%, and the remaining 0.7% was sourced miscellaneously.
Geographically, 11.8% of revenues were generated from South America, 57.5% from Asia, 6.2% from North America, 17% from Europe, 4.3% from the Middle East, and 3.2% from Rest of the World.
Costs/Margins
Cost of goods sold was $5,224 million in the reported quarter, up 10.4% year over year. The upside stemmed from elevated oil costs, impact of exchange-rate variations and input price inflation.
Gross margin was 39.3%, down 510 basis points year over year. Selling, general and administrative expenditure remained flat year over year at $124 million, while research and development expenses flared up 6.2% to $69 million, both on a year-over-year basis.
Balance Sheet/Cash Flow
Vale exited the first quarter with cash and cash equivalents of $5,368 million, higher than the $4,328 million recorded in the previous quarter. In the first three months of 2018, Vale’s loans and borrowings came in at $18,310 million, down from $20,768 million recorded in the preceding quarter.
In first-quarter 2018, the company generated $2,172 million cash from operating activities, as against $3,667 million recorded in the last quarter. Notably, the company's loans and financing repayment totaled $2,277 million in the quarter, down from $3,210 recorded in the prior quarter.
Capital spending summed $890 million, as against $977 million recorded in the previous quarter.
Outlook
Vale is aimed at boosting its near-term competency on the back of stronger mining productivity and new growth investments. This Zacks Rank #3 (Hold) company intends to deleverage its balance sheet by lowering debt on the back of increased cash generation.
Stocks to Consider
Some better-ranked stocks in the Zacks Basic Materials sector are listed below:
The Andersons, Inc. ANDE sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 0.62% over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Allegheny Technologies Incorporated ATI also flaunts a Zacks Rank #1. The company delivered an average positive earnings surprise of 38.69% over the preceding four quarters.
BASF SE BASFY holds a Zacks Rank #2 (Buy).The company recorded an average positive earnings surprise of 5.82% during the same time frame.
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