Two Cyclical stocks should be on the radar for investors: Vale (VALE) and Seadrill. Vale is making new yearly highs while Seadrill may re-test lows. Both have vastly different prospects.
Vale reported on Feb. 16 that output a record 348.8M metric tons of iron ore. It forecast outputting as much as 380 million metric tons this year. When Vale reports quarterly earnings on February 23, chances are good that the company will not report any disappointment. For 2017, assuming an $80 metric ton price for iron ore, the 380M output will add an extra $1.00 per share in revenue for the company in 2017.
Vale has a debt/equity ratio of 0.80 times. A profitable 2017 and 2018 will allow for the company paying off its debt.
Deepwater driller Seadrill is in serious trouble. The company has $8.2 billion in secured debt that needs restructuring. This puts shareholders at risk of dilution. SDRL may issue shares to raise money and pay off some of the debt. Drilling rates are still weak, as oil prices are stuck in the $49 - $55 per barrel range. Until prices for oil moves higher, drilling demand will stay weak.
Expect disappointing results from SDRL when it reports on Feb. 28. The company postponed its ER. It is restating 2015 earnings to reflect U.S. GAAP fair value accounting.
