Shares of Cliffs Natural Resources Inc. (CLF) hit a new 52-week low of $15.50 on Jun 24. The previous low was $16.73.
The Cleveland, Ohio-based international mining and natural resources company, which has a market cap of roughly $2.69 billion, has seen its share price fall roughly 58.33% year-to-date. Cliff’s long-term estimated EPS growth rate is 5.0%. Average volume of shares traded over the last three months came in at approximately 13 million.
Factors Hurting Cliffs
Shares of Cliffs have been going down significantly following its tepid first-quarter 2013 results, reported on Apr 24. Adjusted earnings of 60 cents per share in the first quarter of 2013 slumped 29.4% from 85 cents earned in the year-ago quarter.
However, earnings were well ahead of the Zacks Consensus Estimate of 32 cents. Profit fell on a reported basis due to weak iron ore pricing and lower volume.
Revenues for the quarter came in at $1,140.5 million, down roughly 5.9% from $1,212.4 million in the prior-year quarter and also missed the Zacks Consensus Estimate of $1,226 million. Decline in global iron ore sales volumes led to reduced sales in the quarter.
Lower iron ore pricing, partly due to oversupply in the industry, continues to challenge Cliffs. Iron ore prices were low in the last few months due to the lack of a strong recovery in steel demand in China, the world's largest producer and consumer of steel, and a persistent oversupply in the market. The uneven balance between demand and supply is weighing on iron ore pricing.
The company also contends with higher labor and mining costs. Cliffs is exposed to customer concentration risk. Cliffs’ North American Coal segment is under pressure due to soft pricing for coal products. The uncertain macroeconomic environment, including the European sovereign debt crisis, may impact the company’s operations and its results.
However, Cliffs remains optimistic regarding its financial flexibility, including its prospects for cash generation and the opportunities that will fund organic growth projects and return cash to shareholders. It also has a significant presence in the Asia-Pacific region, where demand is still robust, lending support to shipments. Cliffs carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other companies in the mining industry having favorable Zacks Rank are Claude Resources, Inc. (CGR), Lake Shore Gold Corp. (LSG) and NovaGold Resources Inc. (NG). All of them hold a Zacks Rank #2 (Buy).
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