NEW YORK (TheStreet) -- Shares of Cliffs Natural Resources Inc. (CLF) - Get Report are down by 5.14% to $4.80 in late morning trading on Tuesday, as Chinese iron ore futures fell more than 3% to a record low on Tuesday, Reuters reports.
Steel mills in the world's top consumer avoided buying due to expectations that the raw material's price would drop further.
China's steel mills have been keeping low inventories as a result of an increase of production from miners around the world, Reuters said, adding that demand for iron ore has been hit by harsher environmental checks and a slow recovery in steel demand.
"We do not see any sign of improvement in iron ore and steel fundamentals. Mills have resisted building up stocks due to production cutbacks and weak sales, and prices are likely to fall further," Zhao Chaoyue, an analyst at China Merchant Futures in Guangzhou, told Reuters.
A rise in low cost supplies from Australia and Brazil have been swamping the global market, setting off a glut as the demand from China decreases, Bloomberg reports, adding that ore with 62% content at Qingdao, China, has tanked 28% since the beginning of the year.
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 several weaknesses, 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 deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 3068.1% when compared to the same quarter one year ago, falling from $43.30 million to -$1,285.20 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 75.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 4340.00% compared to the year-earlier 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.
- Net operating cash flow has decreased to $254.90 million or 44.58% when compared to the same quarter last year. Despite a decrease in cash flow of 44.58%, CLIFFS NATURAL RESOURCES INC is in line with the industry average cash flow growth rate of -45.85%.
- CLIFFS NATURAL RESOURCES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CLIFFS NATURAL RESOURCES INC swung to a loss, reporting -$47.52 versus $2.33 in the prior year. This year, the market expects an improvement in earnings (-$0.11 versus -$47.52).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 18.7%. Since the same quarter one year prior, revenues fell by 15.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: CLF Ratings Report