Vale's 2025 Q1 EBITDA Forecast Cut 14% by Goldman Sachs

Goldman Sachs has revised its earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast for Vale S.A. (VALE.US) for the first quarter of 2025, lowering it to $3.1 billion from the previous estimate of $3.6 billion. The adjustment is primarily due to the impact of the rainy season on Vale's Northern System operations, which has led to a decrease in production and the actual grade of iron ore. Additionally, the lower premium for pellets and the increase in nickel costs have put pressure on the company's profit margins.

Despite this downward revision, Goldman Sachs has maintained its "buy" rating for Vale, with a target price of $16.10 per share. The firm believes that Vale will benefit from its operational improvements, particularly in cost management. Since the beginning of last year, Vale's stock price has declined by approximately 40%, mainly due to political issues. However, the company has been gradually addressing these problems since the start of this year, and Goldman Sachs expects a clearer outlook to support a revaluation of the stock.

The firm has also adjusted its EBITDA forecasts for the years 2025, 2026, and 2027 by -3%, -1%, and +1% respectively. These adjustments are mainly due to the lower expected results for the first quarter of 2025. However, the slightly lower costs in 2026 and 2027 are expected to be offset by lower pellet premiums and higher nickel prices.

Goldman Sachs sees Vale's enterprise value (EV) to EBITDA multiple for 2026 at 4.0 times and 3.9 times (excluding dividends). The free cash flow yield for 2025 and 2026 is expected to be 10% and 9% respectively. The firm's continued "buy" rating suggests that it remains optimistic about Vale's long-term prospects, despite the short-term challenges posed by the rainy season and other external factors.