One Reason Cliffs Natural Resources (CLF) Stock is Slumping Today

Cliffs Natural Resources (CLF) stock is down after the company announced it will be adjusting its iron ore production by December 1.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- Shares of Cliffs Natural Resources (CLF) - Get Report are down by 4.83% to $2.56 in mid-morning trading on Tuesday, after the mining and natural resources company announced it will be adjusting its iron ore production by December 1.

The company will be temporarily idling its iron ore pellet production at its Northshore mining operation in Minnesota.

Until domestic customers' blast furnace capacity utilization rates improve, existing customer demand will be satisfied with Cliffs' current pellet inventory, the company said in the announcement.

"The historic high tonnage of foreign steel dumped into the U.S. continues to negatively impact the steel production levels of our domestic customers. As our pellet inventory at both Northshore and United Taconite is adequate to meet current customer demand, we will be able to optimize our working capital and cash flow by temporarily idling production at Northshore." Company CEO Lourenco Goncalves said.

Cliffs believes that both the Northshore and United Taconite operations will be idled through the first quarter of 2016.

Separately, TheStreet Ratings team rates CLIFFS NATURAL RESOURCES INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

We rate CLIFFS NATURAL RESOURCES INC (CLF) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, poor profit margins and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CLF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 71.90%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for CLIFFS NATURAL RESOURCES INC is rather low; currently it is at 15.40%. Despite the low profit margin, it has increased significantly from the same period last year.
  • Net operating cash flow has decreased to $188.70 million or 17.20% when compared to the same quarter last year. Despite a decrease in cash flow CLIFFS NATURAL RESOURCES INC is still fairing well by exceeding its industry average cash flow growth rate of -55.31%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 45.4%. Since the same quarter one year prior, revenues fell by 39.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • CLIFFS NATURAL RESOURCES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CLIFFS NATURAL RESOURCES INC swung to a loss, reporting -$9.62 versus $2.33 in the prior year. This year, the market expects an improvement in earnings (-$0.75 versus -$9.62).
  • You can view the full analysis from the report here: CLF

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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