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What Does Wall Street Recommend for Cliffs ahead of 1Q16 Results?

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Apr. 20 2016, Published 10:20 a.m. ET

Analyst recommendations

The market is quite bearish on Cliffs Natural Resources. Of the 14 analysts covering the company, eight have given it a “hold” recommendation, and five have given it a “sell” recommendation. The stock hasn’t received any “buy” recommendations. The average target price for CLF is $1.75, which represents a downside of 63% from the current share price. While CLF’s share price has run up in 2016, earnings estimates haven’t been revised at the same pace.

Its lowest target price is $1, which was issued by Credit Suisse (CS), Clarkson Platou Securities, FBR Capital Markets, and Deutsche Bank (DB). CLF’s highest target price is $3, which comes from Macquarie.

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Peer recommendations

In comparison, Nucor (NUE) and Steel Dynamics (STLD) have received “buy” recommendations from 47% and 88% of analysts, respectively. U.S. Steel (X) and AK Steel Holdings (AKS) have both received “buy” recommendations from 12% and 13% of analysts, respectively. The stocks have gotten “sell” recommendations from 35% and 25% of analysts, respectively.

Investors can also consider the Materials Select Sector SPDR ETF (XLB) to get diversified exposure to the materials sector. Nucor forms 2.8% of XLB’s portfolio.

Latest rating changes

Macquarie reiterated its “hold” rating on Cliffs on April 19, 2016, ahead of its 1Q16 earnings. It has a target price of $3 on the stock.

On March 17, 2016, Nomura reiterated its “reduce” rating on CLF with a target price of $1.50. After reducing CLF’s target price from $2.50 to $1.50 after its 4Q15 results, Bank of America Merrill Lynch reiterated its target price and “underperform” rating on March 16.

Credit Suisse (CS) started coverage of Cliffs on March 11 with an “underperform” rating and a price target of $1. According to Credit Suisse analyst Curt Woodworth, “Volume trends remain bearish in the US owing to significant structural challenges facing integrated producers. We note that CLF faces debt maturities of $294 million in 2018 and ~$1.7 billion in 2020.”

For a detailed analysis of Wall Street estimates for Cliffs, please read, Cliffs Natural Resources Rallies: Why Are Analysts Still Bearish?

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