2023-07-11 14:25:29 ET
Vale ( NYSE: VALE ) +3.2% in Tuesday's trading as Wolfe Research upgraded the stock to Outperform from Peer Perform with a $17 price target, saying it foresees cost support for iron ore prices at $95-$100/ton and citing the company's strong free cash flow and payout profile.
Despite persistent cautious sentiment on iron ore, prices have surpassed expectations in recent quarters, Wolfe's Timna Tanners said, raising her iron ore forecast by 3% to $110/ton for 2023 and by 11% to $105/ton for 2024, as it anticipates Chinese miners repeating a past practice of shutting capacity below $100/ton.
Vale ( VALE ) shares "offer an attractive hiding place amid global macro uncertainty forecast given its forecast 8% 2023-24 FCF yield and 8% dividend yield after accounting for ~$6.7B of guided Brumadinho and Samarco liability commitments," Tanners wrote.
The stock also may be enjoying a boost from plans outlined by China's central bank and top banking regulator for new measures to help cash-strapped real estate developers, which may help increase demand for Vale's ( VALE ) output.
More on Vale:
- Financial and valuation comparison to sector peers
- Analysis: Vale: Moderately Discounted, Compelling Dividends And Buybacks
- Stock price return: Down 18.5% YTD, down 1.5% in the past 12 months
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Vale upgraded at Wolfe as iron ore prices top expectations