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Cliffs to Idle Second Iron Ore Operation: More Downside Ahead? (Continued from Prior Part) Analyst recommendations
Market expectations for Cliffs Natural Resources (CLF) are varied. Of the analysts covering Cliffs, one analyst has a “buy” recommendation, eight have “hold” recommendations, and six have “sell” recommendations for Cliffs’ stock. The average target price for Cliffs is $2.94, compared with its current market price of $2.36, representing a potential return of 20%. Cliffs forms 0.05% of the Vanguard Materials ETF (VAW).
BHP Billiton (BHP) (BBL) has no “sell” rating, Rio Tinto (RIO) has 29% of analysts recommending a ”buy,” and 20% of analysts recommended a “buy” for Vale (VALE).
Analysts’ ratings
In a note released on September 24, Macquarie Research reaffirmed its “buy” rating, but reduced the target price from $7 to $6 per share for Cliffs due to changes in its iron ore price forecasts. FBR & Co. began coverage on Cliffs on September 18 with a “market perform” rating and reduced its target price from $3.50 to $3 on November 2, 2015. Many brokers, including Bank of America Merrill Lynch, Nomura Securities, and Citigroup, have also reduced their target prices for Cliffs since its 3Q15 results. Most of the downside is likely due to the volume downgrade by Cliffs’ management.
Analysts’ estimates
Analysts have also cut their revenues and earnings estimates since Cliffs’ 3Q15 results. They are projecting sales of $2.0 billion for the next four quarters and EBITDA (earnings before interest, tax, depreciation, and amortization) of $277.2 million. This implies an EBITDA margin of 14%. The actual numbers for the trailing four quarters are sales of $2.8 billion and EBITDA of $465.3 million, implying a margin of 16.5%. Declining sales and EBITDA are likely due to lower volume guidance from Cliffs and the negative sentiment in the US domestic steel market. While Cliffs’ management believes that the situation should improve going into 2016, the market is fairly conservative, and rightly so, given the current state of the US steel market as well as the seaborne scenario.
You can learn more about the iron ore industry at Market Realist’s Iron Ore page.
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CLIFFS Natural Resources
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PRODUCER |
CODE : CLF |
ISIN : US18683K1016 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
CLIFFS Natural Res is a iron producing company based in United states of america. CLIFFS Natural Res produces iron, coal in Australia, in Brazil and in Canada, and holds various exploration projects in Canada. Its main assets in production are WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE and PINNACLE MINE in Canada, AUSTRALIAN IRON ORE and SONOMA in Australia and AMAPA in Brazil and its main exploration properties are MT JACKSON J1 in Australia and DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS and BIG DADDY in Canada. CLIFFS Natural Res is listed in France, in Germany and in United States of America. Its market capitalisation is US$ 6.3 billions as of today (€ 5.5 billions). Its stock quote reached its highest recent level on May 16, 2008 at US$ 99.17, and its lowest recent point on January 15, 2016 at US$ 1.20. CLIFFS Natural Res has 297 400 968 shares outstanding. |