These 3 Mining Companies Are Falling Today

NEW YORK (TheStreet) -- Cliffs Natural Resources (CLF), Rio Tinto (RIO), and Vale (VALE) fell Tuesday due to a sudden drop in iron ore prices.

Cliffs Natural Resources fell 6.4%to $21, Rio Tinto dropped 3% to $53.41, and Vale lost 4.5% to $13.18.

The global iron ore benchmark fell 1.3% to $123.20 Tuesday, marking the lowest price since July 2013. The drop in price is due to a decrease in demand from Chinese buyers and large stockpiles of the metal.

In a recent note to investors, Goldman Sachs analyst Christian Lelong said he expects iron ore prices to fall to $108 a ton in 2014, and $80 a ton in 2015.

CLF Chart CLF data by YCharts

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

"We rate CLIFFS NATURAL RESOURCES INC (CLF) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and generally higher debt management risk."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 37.7% when compared to the same quarter one year prior, rising from $85.10 million to $117.20 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CLIFFS NATURAL RESOURCES INC has improved earnings per share by 6.5% 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 -$6.59 versus $11.34 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus -$6.59).
  • CLF's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CLF's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.56 is low and demonstrates weak liquidity.
  • 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.
  • You can view the full analysis from the report here: CLF Ratings Report

TheStreet Ratings team rates VALE SA as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate VALE SA (VALE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and disappointing return on equity."

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

  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 13.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • VALE SA 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, VALE SA reported lower earnings of $0.94 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($2.23 versus $0.94).
  • VALE'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 30.88%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • Net operating cash flow has decreased to $4,632.98 million or 21.96% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: VALE Ratings Report

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