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Why Vale (VALE) is Up Today

NEW YORK (TheStreet) -- Vale (VALE) gained 2.9% to $15.14 on Friday after selling its stake in Fosbrasil to Israel Chemicals.

Vale sold its 44.25% stake in Fosbrasil for about $52 million. The Brazilian metals and mining corporation also recently sold its 28.7 million shares of Log-in Logistica Intermodal for about R$233 million.

According to Zacks Equity Research the sales are part of Vale's strategy to cut costs and increase margins.

Vale competitors Cliffs Natural Resources (CLF) and BHP Biliton (BHP) also saw gains during Friday trading.

TheStreet Ratings team rates VALE SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate VALE SA (VALE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $4,162.84 million or 2.92% when compared to the same quarter last year. In addition, VALE SA has also modestly surpassed the industry average cash flow growth rate of -2.04%.
  • The gross profit margin for VALE SA is rather high; currently it is at 52.79%. Regardless of VALE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VALE's net profit margin of 1.24% is significantly lower than the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 94.9% when compared to the same quarter one year ago, falling from $2,302.44 million to $117.72 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.94%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 93.47% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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