uploads///Analyst reco

What’s Driving Analysts’ Ratings for Cliffs and Its Peers?


Jan. 12 2017, Updated 10:36 a.m. ET

Analysts’ sentiments

Analysts’ recommendations and ratings are among the most important market sentiment indicators for investors. Ratings tell you how bullish or bearish analysts are on a particular company or industry.

At their extremes, sentiments can indicate direction changes going forward. Generally, when everyone is bearish and dumping stocks, it could mean the bottom and better times ahead, and vice versa.

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Analysts’ sentiments for Cliffs

Analysts covering Cliffs Natural Resources (CLF) have given it 22% “buy” recommendations, 22% “sell” recommendations, and 56% “hold” recommendations. It has a consensus target price of $6.40, which implies a potential downside of 28%.

Steel upgrades

Since Donald Trump’s US presidential win in November 2016, most analysts have turned optimistic on the US steel sector, given Trump’s stance on protectionism and his focus on infrastructure. 

On November 9, 2016, Jeffries analyst Seth Rosenfeld stated, “The US steel industry should stand out as a unique beneficiary of a Trump presidency. Protectionism will significantly rise; the US is already short steel, and falling imports will improve domestic pricing power.”

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Morgan Stanley (MS) also turned bullish on US steel (SLX) stocks after the election. Better fortunes for the US steel sector bode well for Cliffs Natural Resources, the only North American pure-play iron ore pellet supplier. Kurtz has upgraded Cliffs from “underweight” to “equal weight” and increased its target price from $3 to $9.

JPMorgan Chase (JPM) increased its target prices for steel stocks and Cliffs Natural Resources on November 29, 2016. JPM has an “overweight” rating on CLF and has raised its target price from $7 to $10.

Are CLF’s peers overbought?

Macquarie, on the other hand, downgraded six steel stocks on November 29. AKS, Nucor (NUE), and Steel Dynamics (STLD) were among the stocks the company downgraded.

Argus downgraded U.S. Steel from a “buy” to a “hold” on November 29. The company sees the stock as overbought following its surge after Trump’s win.

Axiom analyst Gordon Johnson believes that excess supply poses a risk for iron ore prices. For this reason, he recommends a short position on Cliffs, U.S. Steel, and Rio Tinto (RIO).

While analysts’ reactions have been mixed regarding the recent run-up in stocks, most agree that better times appear to be ahead for the US steel sector due to rising infrastructure demand and Trump’s protectionist measures.


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