The firm said falling iron ore prices through 2014 will mean the steelmaker will use all its debt covenants, which will lead it to cut its dividend even further.
The Cleveland, Ohio-based business will likely also issue a large secondary offering, further diluting its value.
By late morning, shares had taken off 4.2% to $17.87.
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TheStreet Ratings team rates CLIFFS NATURAL RESOURCES INC as a Hold with a ratings score of C-. The 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 reasonable valuation levels, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, 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: