Consensus rating for Cliffs
Approximately 7% of analysts tracking Cliffs Natural Resources (CLF) rate it a “buy” or some equivalent. Approximately 53% rate the company a “hold” or an equivalent, while 40% rate it a “sell.” The consensus target price is $2.98, compared to the current market price of $2.76, which implies a potential upside of 8%.
Cliffs forms 0.05% of the Vanguard Materials ETF (VAW).
In a note released on September 24, Macquarie Research reaffirmed its “buy” rating but reduced the target price from $7 to $6 per share for Cliffs due to changes in its iron ore price forecasts. FBR & Co. began coverage on Cliffs on September 18 with a “market perform” rating and reduced its target price from $3.50 to $3 on November 2, 2015. Deutsche Bank also reduced its target price from $4.60 to $3 with a “hold” rating on October 5. Many brokers, including BOFA Merrill Lynch, Nomura Securities, and Citi, have also reduced their target prices for Cliffs since its 3Q15 results. Most of the downside is likely due to the volume downgrade by Cliffs’ management.
Analysts are projecting sales of $2.28 billion for the next four quarters and EBITDA (earnings before interest, tax, depreciation, and amortization) of $244.2 million. This implies an EBITDA margin of 10.7%. The actual numbers for the trailing four quarters are sales of $2.82 billion and EBITDA of $465.3 million, implying a margin of 16.5%. Declining sales and EBITDA are likely due to lower volume guidance from Cliffs and also negative sentiment in the US domestic steel market. While Cliffs’ management believes that the situation should improve going into 2016, the market is conservative.
You can find out more about the iron ore industry at Market Realist’s Iron Ore page.