Vale (VALE) has outperformed other diversified mining companies by 11% so far this year, supported by strong iron ore prices and increased foreign investment in Brazilian equities, RBC said in a note Thursday.
Iron ore prices have fallen by 5% since US President Donald Trump's "Liberation Day" announcement and are projected to fall further through 2026, RBC analysts, including Marina Calero, said in the note.
Despite the expected decline in iron ore prices, Vale's low valuation, anticipated operational improvements, and strong dividend yield should help support the stock. However, after this recent outperformance and a narrowing valuation gap with peers like BHP (BHP) and Rio Tinto (RIO), the analysts said they now see a "more neutral" outlook.
The analysts added that those companies benefit from lower costs and broader diversification across both commodities and geographies, giving them more protection in a downturn. Brazil-headquartered Vale's earnings are more exposed to iron ore, which makes up 80% of its earnings before interest, taxes, depreciation, and amortization compared with around 60% for BHP and Rio Tinto.
RBC downgraded Vale to sector perform from outperform, and lowered the price target to $11 from $12 per American depositary receipt.
Price: 9.09, Change: +0.09, Percent Change: +1.00
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