Brazilian mining giant Vale (VALE) is the world's second-largest mining company, the largest company in South America, and one of the 25 largest publicly traded companies in the world. Vale conducts mining operations around the world and has a history of forming joint ventures with local companies to generate maximum profits from operations outside of Brazil. Vale is the world's largest producer of iron ore and second-largest nickel producer.
Vale will see increased revenues and profit primarily from increasing prices in metal ores the company mines and sells. The global commodity recession of 2008 to 2009 resulted in a significant reduction in Vale revenues and earnings. The company started to bounce back in 2010, and 2011 first quarter results were a significant improvement over the first quarter of 2010.
Revenues climbed to $13.55 billion from $6.85 billion a year earlier, a 98 percent increase. First quarter net income per share of $1.29 quadrupled the 30 cents earned in the first quarter of 2010. For comparison, fourth quarter 2010 results were revenues of $15.21 billion and net income of $1.12 per share.
The consensus estimate for full year 2011 earnings is $5.20 per share. At $32 per ADR, Vale is trading at just 6.1 times the 2011 estimate. The 2012 earnings are forecast to be at a similar level above $5 per share.
Unusual buy opportunity
Vale's share price has declined due to perceived pressure from the Brazilian government to focus on less profitable but jobs-producing projects in Brazil.
The current share value, due to the controversy, has prompted Goldman Sachs analysts to label Vale as an "unusual buy opportunity" with a very strong earnings outlook.
Analysts do not foresee any near-term decline in iron ore prices. Also, new CEO Murilo Ferreira is perceived to have better relationships with government officials than his predecessor.
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