Cliffs Up to Strong Buy

Zacks

On Dec 20, Zacks Investment Research upgraded mining company Cliffs Natural Resources (CLF) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Cliffs reported third-quarter 2013 earnings from continuing operations of 65 cents per share, up 6.6% from 61 cents reported in the year-ago quarter. Profit from discontinued operations was 1 cent per share compared with a loss of 2 cents in the year ago quarter. Consolidated net income rose roughly 23% year over year to $104.3 million (or 66 cents per share) from a profit of $85.1 million (or 59 cents).

Sales for the quarter came in at $1,546.6 million, up 0.1% from $1,544.9 million in the prior-year quarter. A 17% rise in global seaborne iron ore pricing led to increased sales in the quarter.

Cliffs has implemented a strategic capital allocation plan to ensure optimum utilization of cash. Its focus remains on providing maximum return to the shareholders by way of dividend distribution while maintaining its organic growth pipeline. The company is also pursuing cost management amid a weak pricing environment, reflected by the narrowing of its SG&A (selling, general and administrative) and exploration costs targets for 2013 and cost reductions in its North American Coal operation.

In addition, Cliffs is boosting its mining and transportation capacity globally. It is in the process of manufacturing lower silica and premium grade iron ore concentration products at its Bloom Lake iron ore operation in Eastern Canada. This is expected to attract new customers and boost the mine’s profitability. Cliffs has also employed a global exploration program aimed at identifying and capturing new world-class projects.

The Zacks Consensus Estimate for 2013 for Cliffs has gone up 9.2% to $2.97 per share as all estimates were revised higher over the last 60 days. The Zacks Consensus Estimate for 2014 has also risen by 33.8% to $1.98 over the same period.

Other Stocks to Consider

Other companies in the mining industry which look attractive at current levels, are Vale S.A. (VALE), African Minerals Ltd (AMLZF) and Alderon Iron Ore Corp. (AXX). All these carry a Zacks Rank #2 (Buy).

Read the Full Research Report on CLF
Read the Full Research Report on AXX
Read the Full Research Report on VALE
Read the Full Research Report on AMLZF


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