NEW YORK (AP) -- Cliffs Natural Resources jumped 6 percent Thursday and Nomura Equity Research said the miner will do well if steel demand and iron ore prices recover.
Those odds were boosted after the U.S. Federal Reserve made it easier for businesses to borrow and spend, announcing a program to purchase $40 billion a month to buy mortgage bonds for as long as it deems necessary.
It's a solid rebound for company shares, which have been hammered all year with evidence of a significant slowdown in China, and the debt crisis plaguing Europe. Shares that could be had for around $43 each Thursday traded last year at this time for more than $80.
"While steel demand trends and anecdotal feedback remains very negative in China ..., overall steel production levels are holding up relatively well and we see the potential for sentiment to improve over the next two quarters on stimulus benefits and lagged impact from monetary policy changes, which should start to benefit the real economy," wrote Nomura analyst Curt Woodworth.
Woodworth raised his rating on Cliffs to "Buy" from "Neutral," saying he believes the company is "on the verge of stronger operating momentum." However, he lowered his price target to $54 from $68.
The Cleveland company produces, among other products, iron ore, which is used in blast furnaces as part of the steel manufacturing process.
Prices for iron ore have fallen sharply as the global steel industry has struggled with anemic demand and plentiful supplies. The price for iron ore on Thursday was $99.25 per metric ton, compared with $181.75 per metric ton a year ago, according to the Platts Iron Ore Index cited by Dahlman Rose and Co.
A complicating issue for many producers has been relatively strong steel production in China which has contributed to global inventories of steel and raw materials like iron ore, Woodworth wrote in note to clients.
Steel demand remains weak but companies could start to benefit from increased spending on infrastructure projects and a stabilizing construction market, Woodworth said. That could help iron ore prices.
He also expects Cliffs to increase volumes from its Bloom Lake mine expansion in Canada.
Woodworth lowered his third-quarter earnings-per-share estimate to $1.92 from $2.15. Analysts surveyed by FactSet, on average, predict third-quarter earnings of $1.33 per share.
For 2012, Woodworth has forecast earnings per share of $6.30, down from $7.15. Analysts have predicted 2012 earnings of $5.36 per share.
Shares of Cliffs Natural Resources Inc. rose $2.47 to $43.09 in afternoon trading. The price has ranged from $32.25 to $80.15 in the past 52 weeks.
