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How Analysts Viewed Cliffs Natural Resources’s 3Q16 Earnings Miss

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Analyst sentiments

Analyst recommendations and ratings are among the most important market sentiment indicators you should look at. 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 graph shows analysts’ recommendations for Cliffs Natural Resources (CLF) along with those for US (VTI) (QQQ) steel peers United States Steel (X) and AK Steel (AKS).

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Consensus rating

Cliffs Natural Resources had no “buy” ratings until the end of May 2016—now it has two. Of the nine analysts covering the company, four have given it a “hold” recommendation, and three have recommended a “sell.”

The average target price for CLF is $5.30 against its current market price of $5.00. The target price implies an upside potential of 5%. Macquarie has the highest target price for Cliffs Natural Resources at $10, while Credit Suisse (CS) and Axiom Capital have the lowest target price of $2.

Recent analysts’ actions

Many analysts commented on Cliffs Natural Resources’s (CLF) 3Q16 results, however, none of them have changed their recommendations for the stock.

In an analyst’s note, Cowen commented on CLF’s 3Q16 results, saying, “Cliffs Natural Resources reported 3Q16 results below our and the consensus estimate. Weaker-than-expected US iron ore sales volumes and higher cash costs primarily drove the EBITDA miss.”

Cowan has a “market perform” rating on the stock, with a target price of $9.

Morgan Stanley reiterated its “underweight” rating for CLF, with a target price of $3.

On October 7, 2016, Credit Suisse resumed its coverage of Cliffs Natural Resources with an “underperform” rating and a target price of $2. Credit Suisse analyst Curt Woodworth is bearish on the growth prospect of iron ore. He forecasts the commodity price to average between $40–$45 per ton in 2017 and 2018. Woodworth also feels that most of the positives are already factored into the stock.

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