When companies post weak results and the underlying stock falls afterward, investors should avoid them.
Vale S.A. (VALE) posted mixed Q2 results. Revenue of $9.92 billion is up by 2.6% Y/Y. Iron ore shipments increased by 7% Y/Y to 5.4 Mt. For the rest of the year, Vale expects copper production in the range of 320-355 kt.
It is confident that it will meet its cost guidance for the year.
Vale stock trades at a discount for a reason. Its stock has weak momentum, reflecting the weak growth prospects. More worrying is the weakness in U.S. copper futures. Prices continued to fall on worries that China does not have a plan to re-ignite its growth. At the Third Plenum, the Politburo did not introduce any initiatives that would lead to an increase in copper. In Q2, Vale increased copper production by 5%. However, costs increased by 18% Y/Y to $3,600 per ton.
In the semiconductor sector, STMicroelectronics (STM), a leader in delivering solutions that power electronics, posted weak Q2 results. Revenue slumped by 25.4% Y/Y to $3.23 billion. Free cash flow fell to $159 million, down from $209 million last year. Inventory rose to $2.81 billion.
STM slashed its FY24 revenue in the range of $13.2 billion to $13.7 billion. Revenue from automotive will weaken as the industry slumps.
