What Analysts See in Cliffs Natural Resources under Trump’s Presidency
US steel prices and order books for customers are the major revenue drivers for Cliffs Natural Resources’s (CLF) US division.
Cliffs Natural Resources (CLF) has “buy” recommendations from 22% of analysts covering the stock and “sell” recommendations from another 22% of these analysts.
Wall Street analysts covering Vale are projecting sales of $33.5 billion for 2017, implying a revenue rise of 22% year-over-year.
Among the analysts that track Vale SA (VALE), 30% gave the company a “buy” recommendation, and 17% gave it a “sell” recommendation.
Rio Tinto’s (RIO) EBITDA projection is $17.9 billion for 2017. Analysts have changed their earnings projections several times during the last year.
Of the 16 analysts covering Rio Tinto (RIO), 56% gave it a “buy” recommendation, 25% gave it a “hold” recommendation, and 19% gave it a “sell” recommendation.
Of the 21 analysts covering BHP Billiton (BHP), seven analysts issued “buy” recommendations, 11 gave “hold” recommendations, and three gave “sell” recommendations on the stock.
BHP Billiton (BHP) has seen an upward revision of 32% in revenues and 83% in EBITDA in the past six months.
China (FXI) produced 808.4 million tons of steel in 2016. It produced 68.9 million tons of steel products in December 2016.
According to the median compiled by Bloomberg on February 13, 2017, iron ore prices could drop in every quarter in 2017 to an average of $55 per ton in 4Q17.
Iron ore miners had an unexpectedly good year in 2016, and 2017 is turning out to be even better. Vale SA (VALE) is leading the miners with a year-to-date gain of 30% through March 14, 2017.
Credit Suisse (CS) raised Cliffs’s target price from $2 to $8 on March 3, 2017. However, it’s still not very positive on Cliffs stock.
Cliffs Natural Resources (CLF) is trading at a forward EV-to-EBITDA multiple of 8.4x compared to its trailing five-year average of 9.8x.
Among the most dominant factors driving the recent iron ore price rally are higher steel production and the rise in steel prices in China (FXI).
Iron ore prices finished 2016 with a rise of more than 80.0%. The average for seaborne iron ore prices in 2016 was $58.50 per ton.
While the price of iron ore rallied in 2016, not many market participants are optimistic about the rally’s longevity.
Since US steel demand is the major driver behind steel companies’ volumes and prices, it’s important to track the data for Cliffs Natural Resources (CLF).
During Cliffs’s 4Q16 earnings call, CEO (chief executive officer) Lourenco Goncalves sounded optimistic about US steel prices in 2017.
Higher US steel imports have negatively impacted CLF’s customer order books and pricing.
In January 2017, the United States produced ~6.9 million tons of steel. That was a rise of 6.5% YoY (year-over-year).