NEW YORK (TheStreet) -- Shares of Vale (VALE) are slipping, down 1.12% to $7.93 in early market trading Tuesday, after analysts at J.P. Morgan Chase lowered its iron ore outlook through 2017 this morning.
JPMorgan now expects iron ore to be $69 per metric ton in 2017, down 16% from its prior forecast.
The firm also lowered its 2016 forecast to $65 per metric ton, down 23% from its prior estimate.
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Analysts at the firm now forecast $67 per metric ton of iron ore next year in 2015, 24% lower than its previous forecast.
"The only way the oversupply can be averted is if the low-cost producers cut back on their growth targets," added analysts at JPMorgan.
Vale is a Brazil-based metals and mining company operating in four segments including bulk material, basic metals, fertilizers, and logistic services.
Separately, TheStreet Ratings team rates VALE SA as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALE SA (VALE) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 140.3% when compared to the same quarter one year ago, falling from $3,565.05 million to -$1,437.00 million.
- Net operating cash flow has decreased to $2,940.00 million or 36.54% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, VALE SA has marginally lower results.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, VALE SA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 140.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- VALE SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse 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 ($1.15 versus $0.01).
- You can view the full analysis from the report here: VALE Ratings Report