NEW YORK (TheStreet) -- Shares of Vale S.A. (VALE) were down 0.85% to $9.35 in morning trading Monday after the CEO of fellow mining company Rio Tinto (RIO) , which gets 92% of its revenue from iron ore, said he is not fazed by plunging iron ore prices.
Rio Tinto CEO Sam Walsh told Reuters over the weekend he believes his company's production costs of $20.40 per metric ton, an industry low, in the first half of 2014 will help the company through this period of falling ore prices. He added he is confident in his company's ability to increase returns to shareholders when the company announces full-year results in February, and says Rio Tinto has no plans to trim its 2015 capital spending target of $8 billion, which it announced last year.
Rio Tinto is on pace to increase its output by 9% to 290 million metric tons with an eventual climb to 360 million metric tons, which would place it second in size behind Vale and well ahead of third-place BHP Billiton (BHP) .
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Separately, 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 revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VALE's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 1113.0% when compared to the same quarter one year prior, rising from $117.72 million to $1,428.00 million.
- VALE SA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VALE SA reported lower earnings of $0.01 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $0.01).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Metals & Mining industry and the overall market, VALE SA's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- VALE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 46.46%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- You can view the full analysis from the report here: VALE Ratings Report