CIBC World Markets: Sector Performer rating and $34 price target for Cliffs Natural Resources Inc.
According to CIBC World Markets:
April 25, 2013
Stock Rating: Sector Performer
12-18 mo. Price Target: $34.00
Cliffs Natural Resources Inc.
Q1 Results Should Alleviate Selling Pressure
- Exhibiting good cost control should help sentiment for the stock. We continue to view declining iron ore prices as a near-term headwind and foresee an attractive entry point later in the year. Sales volumes should increase going forward helping to further boost earnings and sentiment.
- Cliffs reported adjusted EPS of $0.37 in Q1, slightly below our estimate of $0.39 and consensus of $0.32. The miss in Q1 was a result of lower iron ore sales volumes and realized pricing, offset by lower COGS. CFPS in Q1 was $1.34 compared to our estimate of $1.29 and consensus of $0.73.
- Iron ore production in the quarter was generally in line with our expectations totaling 9.8MM tons versus our estimate of 10MM tons. Iron ore sales volumes in Q1 were seasonally weak at 7.2MM tons, down from 11.8MM tons in Q4 and below our estimate of 8.2MM tons.
- Given that Q1 is typically the seasonally weakest period for Cliffs due to winter conditions in the Trough and Great Lakes region, the lower quarter should not be a surprise. We have trimmed our price target to $34 from $36 to account for our revised operating costs and realized pricing estimates.