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How Analysts Rate Cliffs Natural Resources post–Q2 Earnings

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Analyst sentiments

Analyst recommendations and ratings are one of the most important market sentiment indicators for investors. Analyst ratings tell you how bullish or bearish analysts are on a particular company or industry. At the extreme, the sentiment could be an indicator of a change in direction going forward. Generally, when everyone is bearish and dumping stocks, it could mean a bottom and better times ahead, and vice versa

The above chart shows analysts’ recommendations for Cliffs along with its US steel peers such as United States Steel (X) and AK Steel (AKS).

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Is sentiment turning?

Cliffs Natural Resources (CLF) had no “buy” ratings until the end of May 2016. Now it has two. Of the nine analysts covering the company, five have given it a “hold” recommendation and two have recommended a “sell.”

The average target price for CLF is $5.8 compared to its current Market price of $8.1. The target price still implies a downside potential of 28%.

Macquarie has the highest target price for Cliffs at $11. Axiom Capital has the lowest target price of $2 for the stock.

Recent upgrades

On May 31, 2016, JPMorgan Chase (JPM) upgraded Cliffs from “neutral” to “buy.” JPM was positive about the upside to Cliffs’ price due to improving US (VTI)(DIA) steel prices. After Cliffs’ 2Q16 results, JPM reiterated its “overweight” rating on the stock.

Macquarie upgraded Cliffs from “neutral” to “buy” on June 10, 2016. It also increased the stock’s target price from $4 to $7.50. It believes Cliffs’ earnings should be supported by higher US steel prices and volumes. The broker further raised the target price for Cliffs’ stock from $7.5 to $11 post its impressive 2Q16 results and optimistic management commentary.

FBR Capital markets also upped its target price for Cliffs from $4 to $7.

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