Mining giant Vale S.A. (VALE - Analyst Report) reported weak financial results for third-quarter 2014 on Oct 27, following which the share price of the company declined 4.6%. Underlying earnings per ADR (American Depositary Receipt) came in at 13 cents, dropping 81.7% year over year and 66% sequentially. In the third quarter, the company posted a loss of 15 cents and hence missed the Zacks Consensus Estimate of earnings of 30 cents per share. Reduction in revenues was the primary reason behind the earnings decline.

Revenues

Net operating revenues declined 26.5% year over year and 8.5% sequentially to $9.2 billion. Revenues came in lower than the Zacks Consensus Estimate of $10.6 billion. Of Vale’s total gross revenue of $9.2 billion, sales of ferrous minerals accounted for 64.2% of the aggregate tally; coal 2.2%; base metals 23%; fertilizer nutrients 8.1%; and the remaining 2.6% came from miscellaneous sources.

Geographically, 20.6% of revenues were generated from South America, 49.2% from Asia, 8.1% from North America, 17.1% from Europe, 3.9% from the Middle East and 1.2% from Rest of the World.

Expenses

In the third quarter, cost of goods sold totaled $6.5 billion, up 3.8% year over year. Selling, general and administrative expenditures stood at $274.0 million, while research and development expenses were $194.0 million; declining 8.7% and 4% year over year, respectively.

Balance Sheet/Cash Flow

Exiting the third quarter of 2014, Vale had cash and cash equivalents of $7.8 billion versus $7.1 billion in the previous quarter. Long-term liabilities came in at $49.1 billion, down marginally from $50.9 billion in the preceding quarter.

In the reported quarter, net cash generated from operating activities amounted to $2.9 billion compared with $4.3 billion in the year-ago quarter; while capital spending was $3.2 billion versus $3.0 billion in the third quarter of 2013.

Outlook

Management believes that demand for steel will rise globally by 2% in 2014, thereby driving the worldwide requirement for iron ore. Steady economic growth rates in European Union, U.S. and China will support such outcomes in the market. The demand and price for nickel will possibly rise in 2015, taking into account the fall of NPI manufacturing in China due to depleting ore stocks.

Other Stocks to Consider

With a market capitalization of $52 billion, Vale currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Green Plains Inc. (GPRE - Snapshot Report), Nucor Corporation (NUE - Analyst Report) and Alcoa Inc. (AA - Analyst Report). While both Nucor Corporation and Green Plains Inc. sport a Zacks Rank #1 (Strong Buy), Alcoa Inc. carries a Zacks Rank #2 (Buy).

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