NEW YORK (TheStreet) --Shares of Cliffs Natural Resources Inc. (CLF) - Get Cleveland-Cliffs Inc. Report were lower by 7.87% to $6.16 in late afternoon trading on Monday, as the iron ore and metallurgical coal producer reacted negatively to Australia cutting its iron ore price estimate for next year.
Shares of Cliffs Natural resources are up by 0.11% to $6.17 in after-hours trading today.
Australia slashed its iron ore price estimate by 33% due to a rise in output, which has outpaced Chinese demand and growth, creating a surplus, Bloomberg reports.
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Australia's Department of Industry said iron ore prices will average $63 a metric ton, compared to $94 a ton forecast in September, Bloomberg added.
Iron ore fell 49% this year due to miners expanding production in Australia, which pushed the market into oversupply, Bloomberg noted.
Additionally, energy stocks took a hit today as oil prices fell due to comments made over the weekend by Saudi energy minister Ali al-Naimi, who said the nation will maintain its oil production, and is considering an increase if it discovers a new client, MarketWatch reports.
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 deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
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 5116.7% when compared to the same quarter one year ago, falling from $117.20 million to -$5,879.60 million.
- The debt-to-equity ratio is very high at 108.31 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, CLIFFS NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $227.90 million or 23.26% when compared to the same quarter last year. Despite a decrease in cash flow of 23.26%, CLIFFS NATURAL RESOURCES INC is in line with the industry average cash flow growth rate of -30.49%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 74.21%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 6021.53% 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.
- You can view the full analysis from the report here: CLF Ratings Report