Boston, MA 10/06/2014 (wallstreetpr) – A series of poor performances by Cliffs Natural Resources Inc. (NYSE:CLF) that had gone unnoticed has finally caught the attention of research firms on Wall Street. A research finding by Nomura clearly shows that just like other players in the space the company is struggling due to a decline in prices for iron ore.
Cliffs Natural Downgraded to ‘Reduce.’
Nomura Research firm after taking note of the markets fundamentals and Cliffs Natural Resources Inc. (NYSE:CLF) struggles in the industry has downgraded the company to a ‘Reduce’ from a ‘Buy’. The equity research firm now has a share price target of $5, down from a high of $18. A decline of $55 for a ton of iron ore according to analyst, Curt Woodworth, is expected to have a negative impact on earnings in the short-term.
Declining iron ore prices according to the analyst will likely affect any potential asset sales in the space as a result of depreciating value. Wall Street remains skeptical about the company’s ability to maintain its dividend offer under the current market conditions. Atrocious market conditions also raise uncertainty over the company’s financial ability to carry out any stock buyback as an option of countering any further decline in stock prices.
Declining Value Concerns
Deutsche Bank AG (USA) (NYSE:DB), RBC Capital and Wells Fargo & Co (NYSE:WFC) have already weighed into the company’s poor run consequently downgrading it to a sell. The main concern in the company is not in the U.S production, but Canadian and Australian productions, which have only been siphoning cash without any impressive returns. Critics are already arguing that the company’s net value has depreciated significantly and is now less than its current assets and account receivable.
Questions are already being asked whether the company has the $1 billion needed, to expand its mines in eastern Canada as earlier announced. Higher iron prices, as well as high debt leverage, continues to be the niggling challenge for the company consistently suppressing cash margins.