VALE at Risk from Headwinds, Retains Few Scopes for Growth

We have issued an updated research report on the premium industrial metals & minerals company Vale S.A. VALE on Dec 28, 2015. Incepted in 1942, the company is currently regarded as the largest exporter as well as importer of iron ore and pellets in the global mining market. Over time, the firm has managed to significantly improve the scale of its business through tactical strategies. However, of late, Vale’s affairs are faced with certain risks stemming from external headwinds.

Scopes for Improvement

Vale is improving its business on the back of productivity enhancement strategies, specialized cost-saving plans and organic growth projects. In the upcoming quarters, the company anticipates to lower its absolute debt with efficient disinvestment programs and tactful capital-deployment strategies. Moreover, increasing industrialization in the contemporary economies is expected to enhance demand for industrial raw materials offered by Vale.

Problems to Consider

Weak iron ore price continues to hurt Vale’s aggregate revenue and margins. Moreover, the company’s business remains highly sensitive to the current economic uncertainties and market headwinds. Also, Vale’s business depends on licenses and permits issued by the government, and hence, any change in governmental policies might lead to termination or suspension of licenses. Such circumstances adversely affect the company’s growth or productivity plans, thereby directly affecting its revenues and margins.

Stocks to Consider

Vale S.A. currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Fortescue Metals Group Limited FSUGY, Coeur Mining, Inc. CDE and Harmony Gold Mining Company Limited HMY. All three stocks hold a Zacks Rank #2 (Buy).

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