NYSE : US$18.46
Shares of Cliffs Natural Resources dropped on Wednesday after Morgan Stanley downgraded the stock and Credit Suisse slashed its price target on the shares.
A big increase in the supply of iron ore pellets in the Great Lakes region over the next three years could hit earnings from Cliffs’ U.S. iron ore segment hard, Morgan Stanley said in a note to clients. Credit Suisse also sees a looming pellet surplus in the Great Lakes and said Cliffs may need to consider “drastic solutions” to shore up its balance sheet in the next 12 months, from selling iron ore assets in the Asia-Pacific region to a multibillion-dollar equity offering. “
Major reform is required if this business is to survive the next commodities cycle, in our view,” read the brokerage’s note. U.S. iron ore was responsible for about 60 percent of Cliffs’ earnings before interest, taxes, depreciation and amortization (EBITDA) in 2012, Kurtz said, and the segment’s EBITDA could drop by half.
Even before Wednesday’s decline, Cliffs’ stock had fallen 70% over the past 12 months. In February the company reported a quarterly loss, hurt by a $1 billion writedown and iron ore prices that swooned in the autumn on weak demand from China, the world’s largest producer and consumer of steel.
- Cliffs Natural Resources Inc (CLF) Plunged on Analysts Downgrades (valuewalk.com)
- Futures Falling; Cliffs Plunges 13% (blogs.barrons.com)
- Why Cliffs Natural Shares Plunged Again (fool.com)