Vale SA (VALE) Stock Update

The year 2015 is one of the worst years for energy sector companies. There is a decline in value of all the energy sector’s companies, year-to-date (YTD), as a result of weak prices in the sector. Vale SA (ADR) (NYSE:VALE) has underperformed the Dow Jones and S&P 500 indices YTD. The stock of the company slumped by 20.9% YTD against the gain in Dow Jones and S&P 500 indices by 0.21% and 1.67% in the same period respectively. Vale’s stock is currently trading at $6.5 as of 12:08 PM EDT on June 5.

Vale started off this year with a stock price of $7.94 and was up at its highest level of $8.8 on May 5. Moreover, the company traded at $5.58 on April 1, which is the lowest point this year. In last 52-weeks, the Vale’s stock has been trading in the range of $5.45 and $14.93. Bidness Etc provides a quick recap of the latest news, views of analysts and consensus estimates for Vale’s stock.

Recent News
The CFO of Vale, Luciano Siani in an interview said that the company will be focusing on high-grade iron ore in order to get premium prices. There has been a dip in iron ore prices lately due to weak demand from Chinese markets and supply glut. Mr. Siani said: “We have a lot of oversupply of more standard ore, but we are seeing very robust premiums for high quality ore.” The production of high-grade iron ore at low cost will help the company to operate in low price environment.

In early May, Vale announced that it might slashed its production so that prices in the market may stabilize. On this news, Chinese market surged by about 4%. The decision of the company was supported by Moody’s, as the analysts of the firm stated that it’s the first time that a supplier has realized that a reduction in production is required in order to stabilize the prices in a supply glut situation.

Research Firms Analysts’ Views
Moody’s in mid-May changed its outlook for the Vale to Negative from Stable. However, in the research note, the firm has reaffirmed the Baa2 rating for company’s senior unsecured debt. According to Moody’s: “The company’s credit profile and operations remain solid,” but the change in outlook came due to iron ore and base metals prices, which are at low levels due to supply glut concerns. Moody’s in the report stated: “The deterioration in market fundamentals for iron ore and base metals, pressuring commodity prices in a period in which Vale is undergoing a large expansion phase with substantial capital expenditures.”

In late May, Citigroup adjusted the estimates for iron ore prices to low levels. The research firm is of the view that slump in iron ore prices will adversely affect the businesses of Rio Tinto plc (ADR) (NYSE:RIO), Vale, and BHP Billiton Limited (ADR) (NYSE:BHP).

Merrill Lynch in a research report for investors reiterated its rating of Underperform with a price objective of $7.5 for the stock of Vale. The research firm is bearish over the stock due to cash flow issue, which the company is facing. The analyst at Merrill Lynch, Thiago Lofiego has predicted a gap prior to asset sales to fall in the range of $7-13 billion.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with our FREE daily email newsletter.