Earnings Release: Here's Why Analysts Cut Their Vale S.A. (BVMF:VALE3) Price Target To R$75.44

Vale S.A. (BVMF:VALE3) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was an okay result overall, with revenues coming in at R$42b, roughly what the analysts had been expecting. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Vale

Following last week's earnings report, Vale's 21 analysts are forecasting 2024 revenues to be R$207.5b, approximately in line with the last 12 months. Statutory earnings per share are predicted to shoot up 26% to R$11.38. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$208.8b and earnings per share (EPS) of R$11.23 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

With no major changes to earnings forecasts, the consensus price target fell 7.2% to R$75.44, suggesting that the analysts might have previously been hoping for an earnings upgrade. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Vale at R$98.49 per share, while the most bearish prices it at R$42.64. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Vale's revenue growth is expected to slow, with the forecast 0.9% annualised growth rate until the end of 2024 being well below the historical 8.5% p.a. growth over the last five years. Compare this to the 12 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 1.0% per year. Factoring in the forecast slowdown in growth, it looks like Vale is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Vale going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Vale that you need to take into consideration.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.