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Cliffs natural resources off to a steep climb? What investors are forecasting?

Updated on February 18, 2014

Cliffs natural Resources Inc. (CLF) is the largest of mining company in North America. It is primarily focused on mining and natural resources. As a member of the S&P 500 Index, Cliffs Natural Resources Inc. is one of the largest international players in the industry of iron ore production. The significant products of the Company are low-volatile and high-volatile metallurgical coal. Since the Company is an independent entity, it has shares being traded in the New York Stock Exchange. Cliffs Natural Resources Inc. is formerly known as the Cleveland-Cliffs founded in Cleveland, Ohio.

Company Profile:

Cliffs Natural Resources Inc. is traded as NYSE: CLF, S&P 500 Component. It belongs to the iron ore industry and was founded in Cleveland, Ohio, United States in the year 1846. The main founder of the Company is Samuel Mather along with other associates. In 2013, based on Cliffs natural resources stock news, the total revenue of the Company totaled to $1.5 billion with a total asset of $13.5 billion as of 2013.

Investing Commentary

According to CFL stock news, the demand of iron raw materials has been driven by China. With the advancement of China’s economy, more and more iron raw materials are needed. It is estimated that the trend will still continue for the next decade leading to increased CLF earnings. In addition to this, other developing countries around the world would be hungry for more natural resources to sustain its economic growth according to Cliffs natural resources stock analysis.

At the start of the 2014, the CLF stock price of iron ores has drastically decreased. However, with the growing environmental concern in China and other developing countries, iron ores’ price is seen to increase. For example, the pollution control in China requires companies to export higher grades of pellets, ores, and lumps. This report has been included in the recent Cliffs natural resources stock news. Furthermore, the increase in freight rates and logistics prices will also affect the industry.

In 2014, the demand for iron raw materials is perceived to grow even more as stated by CFL stock news. As the economy recovers, it is estimated that the world’s consumption of iron will increase by 4%. The United States is up to bounce back from the economic turmoil it had in the past, which will result to increased infrastructure construction and automobile production per Cliffs natural resources stock analysis.

Cliffs Natural Resources Inc. made a decision to reduce the cost of their products to increase the demand. In addition to this, exploration for additional ore mining area gave the company a better sales margin that easily grew to CLF estimates of $349 million.

The SG&A and exploration has led to Cliffs expanding its operation in the Empire and Tilden mines; thus, making Cliffs as the sole owner of United Taconite mine in Minnesota, which they previously own only 70% of it. Cliffs natural resources stock also increased its operation in North America by 64% - meaning it will have more ore production capacity for the coming months.

Operations Overview

To date, there are 4 major operations of Cliffs Natural Resources Inc. These are the U.S. Iron Ore, Eastern Canada Iron Ore, Asia Pacific Iron Ore, and North American Coal. Each of these operations has its share to the overall profit of the Company as seen in CLF stock analysis.

  • U.S. Iron Ore – there are five mines that Cliffs manages. These five mining areas are concentrated on mining iron ores and mainly located in Michigan and Minnesota. Every year, the five iron mines can produce 32.9 million tons of ore pellet. This massive number is equivalent to the 57 percent mining production of the whole United States. When it comes to equity ownership, Cliffs own 44.2 percent or 25.5 million tons of the total U.S. pellet production in a year. According to data gathered, CLF stock sold 23.0 million of iron ore pellet in 2010, 24.2 million in 2011, and 21.6 million in 2012.
  • Eastern Canada Iron Ore – there are two iron ores that Cliffs own in eastern Canada. Majority of the produced iron ores from this area is shipped to Asia and seaborne market. Every year, CLF stock’s iron ore mines in Canada can produce 12.8 million tons of iron ore every year. In 2012, Cliffs produced 8.9 million metric tons of iron ore pellets; 7.4 million of iron ores in 2011; and 3.3 million of iron ores in 2010.
  • Asia Pacific Iron Ore – majority of the iron ore operation of Cliffs in regards to Asia Pacific is in Western Australia, specifically, the Koolyanobbing complex, which contributes to CLF earnings. Since this place is very near to Asia, most of the mined iron ores are directly shipped to the Asian continent. The Asia Pacific Iron Ore of Cliffs has the production capacity of 11.0 million metric tons per year, as mentioned in Cliffs natural resources stock news. In 2012, the Australian-based mining areas sold 11.7 million metric tons of iron ore. In 2011 and 2010, it sold 8.6 million and 9.3 million metric tons of iron ore respectively. Because of this, Cliffs has a great influence to the Asian CLF stock price.
  • North American Coal – the main mining areas of Cliffs natural resources stock are located in Alabama and West Virginia. These mines are metallurgical coal mines and can definitely produce unique and high grade types of iron ores. Every year, the combined capacity of these mines is 9.4 million tons. From 2010, the coal mines have seen an exponential increase in production. For example, Cliffs was able to produce 3.3 million tons of iron ore in 2010, 4.2 million tons in 2011, and 6.5 million tons in 2012.

Cliff’s increased growth in 2014

Cliffs Natural Resources Inc. is globally known as the leading iron ore mining company. Because of its international operations, it is been on top of the competition since its conception. However, the Company, just like most of the players in the international market, faced a great blow in the income generation in year 2013.

Thankfully, 2014 is up for a good start. The automobile industry of the United States is steadily recovering. Along with the construction industry, the demand for iron ore is now increasing together with Cliffs natural resources stock price. Nevertheless, Cliffs need to go head-to-head against other major competitors such as the BHP Billiton and Rio Tinto.

Today, the operations in the United States are seen to give the necessary boost the company has long been need of. CLF earnings are now free from the troubles of seaborne trade, enabling the Company to redirect its focus back to the US economy and market. This is a very timely development as the US is seen to improve its economic standing during the early to late months of 2014. The booming US economy can be taken advantage of by Cliffs natural resources stock price to create a 100% increase in dividend pay-out.

On the other hand, the seaborne trade market possesses a fiercer competitive environment according to CLF stock analysis. Thus, while CLF might be concentrating on its local market, it should never forget about its international operation. There are a lot of expansion opportunities that can be harnessed. For the last few years, China’s voracious need for more metal ore has been the driving force for Cliffs’ continued growth as seen in CFL stock news. Fortunately, this trend will still continue as steel production is forecasted to grow within this at a rate of 3.1% CLF estimates.

The benefits that can be acquired from the local and international market will not only improve the income of Cliffs natural resources stock analysis, but also its shareholders. Furthermore, Cliffs is eyeing for the Bloom Lake as its next prospect for growth and expansion to stabilize CLF stock price.

At this point in time, it is worth noting that Cliffs has acquired its partners ArcelorMittal and United States Steel in 2010 based on Cliffs natural resources stock news. This move has given Cliffs the 100% stake in mining for the price of $88 million.

Growth Strategy

The growth strategy of Cliffs has been very effective ever since it opened its mining area in Michigan (1850). Because of various marketing strategies of Cliffs, it has been on the forefront of steelmaking industry and effectively adapting to many changes based on CFL stock news. This has pushed many competitors to recognize its supremacy.

There are four major growth strategies of Cliffs. These are the global execution, scale diversification, operational excellence, and shareholder returns. While it is true that the mining areas of Cliffs natural resources stock located in North America give the Company most of its income, Cliffs’ strategies are directed to increase its scope to the seaborne and international market. This is seen to be realized through diversifying the reach of Cliffs to various end-markets, expanding into various geographies with low political risks, increasing the amount of money being investment in the global market, evaluate the strategy, and identify areas where to improve and where to capitalize.

Cliffs’ Earning Forecasts

There had been many forecast about the growing income and market of CLF stock. For December 2013, the consensus EPS forecast for Cliff’s is 0.78, with High EPS forecast of 0.96, low EPS forecast of 0.59, number of estimates of 14, and number of revisions of 3. For March 2014, the consensus EPS forecast is 0.28, high EPS forecast is 0.35, low EPS forecast is 0.21, number of estimates is 4, and number of revisions is 1. In June 2014 CLF stock analysis, the consensus EPS forecast is 0.59, high EPS forecast is 0.73, low EPS forecast is 0.38, number of estimates is 4, and number of revisions is 1. In September 2014, the consensus EPS forecast is 0.62, high EPS forecast is 0.83, low EPS forecast of 0.24, number of estimates of 4, number of revisions is 1. Finally, in December 2014 CLF estimates, the consensus EPS forecast is 0.56, high EPS forecast of 0.79, low EPS forecast is 008, number of estimates is 4, and number of revision is 1.

On the yearly basis, investors see brighter future for their shares in Cliffs natural resources stock. In December 2014, the consensus EPS Forecast is 1.99, high EPS forecast is 3, low EPS forecast is 2.82, number of estimates is 4, and number of revision is 1. In December 2015, the consensus EPS forecast is 2.21, high EPS forecast is 3.3, low EPS forecast is 1.03, number of estimates is 6, and number of revisions is 1.

The PEG Ratio of Cliffs is also in good shape and a good indicator of better CLF stock price. For the most part, investors are always on the look for companies with positive growth potential. The forecasted PEG Ratio of Cliffs is 1.42. In theory, the lower the PEG ratio, the better the performance of Cliff will be. This means that Cliffs is paying less investment, but with bigger annual income.

According to CLF stock analysis, when it comes to P/E growth rates, the CLF stock has 7.10 points in 2013 and 10.34 in 2014. This shows that the Company is expected to grow in this coming year. The forecasted earning growth of Cliffs will increase by 11.18 percent by December 2015 and 5% in the next 5 years. Furthermore, the Earning Ratio of CLF will reach 10.34 in 2014, while 9.31 in 2015. Though the preceding year might be lower in terms of Cliffs natural resources stock price, it is still a good figure considering the intense competition in the global market.

To date, the recommendation of NASDAQ is Buy based on CLF estimates. The continuum contains Sell (in the far left) followed by Underperform, Hold, Buy, and Strong Buy (in the far right). There are many analyst firms that can back up these recommendations and may very well attest to increased CLF earnings in the future. These include Cowen & Company, J.P. Morgan, Macquarie Capit, Wells Fargo Sec, UBS, Morgan Stanley, Keybanc Cap Mkt, Goldman Sachs, BB & T Capital, Nomura research, and B of A M L.

Core Values

The Cliffs Natural Resources Inc. reached its state now because of its core values. Because of these core values, Cliffs has been guided to greatness and constantly delivered excellent services. The core values of Cliffs natural resources stock analysis include safe production, customer focus, integrity, teamwork, accountability, environmental stewardship, trust, open communication, respect, and economic value.

Global Business Development

Investments will surely be safe with Cliffs natural resources stock price. The Company is never static, but dynamic in progress and development. The main strategy of Cliffs in expanding its market is through global exploration, drilling campaigns, and mining tenements.

The main focus of Cliffs is on the developing countries such as India, Brazil, and China. The Urbanization of these countries will demand for higher consumption of steel and iron.

Conclusion

The initial months of Cliffs Natural Resources has seen steep climb in their CLF earnings and the trend is forecasted to continue for the next few years. Driven by better economy of the United States and increased demand from developing countries, Cliffs Natural Resources can offer the best investment for many businessmen. According to many analysts, the margin of profit of CLF estimates will steadily increase, giving shareholders the peace of mind and confidence on their investments.

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