Vale (VALE) Lags Q2 Earnings, Stock Up On Q/Q Sales Growth

Mining giant Vale S.A.’s (NYSE:VALE) second-quarter 2016 diluted earnings of 14 cents per share that missed the Zacks Consensus Estimate of 17 cents. The bottom line also plunged 26.3% year over year.

Apart from the quarterly earnings, the company’s revenues came in below the year-ago tally. However, the company witnessed substantial top-line growth on a sequential basis, which resulted in its share price hike in the afterhours trading session.

Revenues

Net operating revenue fell 4.9% year over year but jumped 15.9% sequentially to $6.6 billion. The sequential improvement was driven by higher selling prices of pellets and iron ore fines as well as greater volume of sales of iron ore fines.

Of total net operating revenues, sales of ferrous minerals accounted for 68.5%, coal contributed 2.2%, base metals comprised 21.8%, fertilizer nutrients made up for 7%. The remaining 0.4% was sourced miscellaneously.

Geographically, 15% of revenues were generated from South America, 55.4% from Asia, 7.7% from North America, 17.2% from Europe, 3.6% from the Middle East and 1.1% from Rest of the World.

Expenses

In the second quarter, cost of goods sold totaled $4.8 billion, down 7.5% year over year. Selling, general and administrative expenditure declined 11.9% to $140 million, while research and development expenses decreased 33.9% to $78 million, both on a year-over-year basis.

Balance Sheet/Cash Flow

Vale exited the second quarter with cash and cash equivalents of $4.2 billion compared with $3.2 billion in the year-ago period. Non-current liabilities came in at $47.9 billion, up from $47.1 billion recorded a year ago.

Net cash from operating activities came in at $2.2 billion as against $996 million in the year-ago comparable period. Capital spending totaled $1.2 billion compared with $2.1 billion in second-quarter 2015.

Outlook

Vale expects to improve its financial fundamentals on the back of specialized cost-saving plans, productivity enhancement schemes, growth projects and superior mining yield, going forward. Moreover, the company aims to stabilize its absolute debt level in the coming quarters through efficient disinvestment programs and suitable capital-deployment strategies.

Share Price

As of Jul 28, 2016, Vale closed the trading session at $5.80 per share. Shares of the company rallied roughly 1% in afterhours trading on Jul 28, after the second-quarter result announcement.

Zacks Rank and Stocks to Consider

Vale currently carriers a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kumba Iron Ore Ltd. (OTC:KIROY) , Fortescue Metals Group Limited (OTC:FSUGY) and Barrick Gold Corporation (NYSE:ABX) . All the three companies currently hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>