One Reason Cliffs Natural Resources (CLF) Stock is Falling

NEW YORK (TheStreet) -- Shares of Cliffs Natural Resources Inc. (CLF) are down by 9.50% to $4.34 in late morning trading on Tuesday, as Australia reduces its 2015 price forecast for iron ore.

Australia's Department of Industry and Science cut its estimate by 10% to $54.40 per tonne from $64.40 per tonne due to weak outlook from China, the commodity's main market, Reuters reports.

At the beginning of the year the department estimated for prices of $94 a tonne.

"China's steel production is forecast to contract in 2015 and 2016 as the seaborne supply of iron ore increases," the Department of Industry and Science said, Reuters noted.

Cliffs Natural Resources is a Cleveland, OH.-based mining company that has an iron ore mining complex in Western Australia as well as several other mining and related operations across North America.

Other iron ore mining stocks declining today include Vale SA (VALE), lower by 3.27% to $5.92, and BHP Billiton (BHP), slipping by 2.35% to $40.75 this morning.

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, poor profit margins, 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 980.8% when compared to the same quarter one year ago, falling from -$70.30 million to -$759.80 million.
  • The gross profit margin for CLIFFS NATURAL RESOURCES INC is rather low; currently it is at 24.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -170.35% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$228.20 million or 178.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 68.25%, 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.
  • CLF, with its decline in revenue, underperformed when compared the industry average of 17.4%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: CLF Ratings Report

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