Top 5 Consumer Service Stocks To Watch For 2016

Top 5 Consumer Service Stocks To Watch For 2016: Cliffs Natural Resources Inc.(CLF)

Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. The company operates six iron ore mines in Michigan, Minnesota, and eastern Canada; two iron ore mining complexes in Western Australia; five metallurgical coal mines located in West Virginia and Alabama; and one thermal coal mine located in West Virginia. It also owns a 45% economic interest in a coking and thermal coal mine located in Queensland, Australia; and a 30% interest in Amapa, a Brazilian iron ore project in Latin America, as well as chromite properties in Ontario, Canada. The company, formerly known as Cleveland-Cliffs Inc, was founded in 1847 and is headquartered in Cleveland, Ohio.

Advisors' Opinion:

• [By Ben Levisohn]

  After yesterday’s announcement that Cliffs Natural Resources (CLF) would look to exit its Bloom Lake project, Deutsche Bank’s Jorge Beristain and team slashed their rating on the struggling iron miner to Hold from Buy. They explain why:

  Agence France-Presse/Getty Images

  Stripping out [Eastern Canada iron ore] operations from 1Q15 onwards, lowers Deustche Bank’s estimated EBITDA by an average of 5% over the next 3 years to ~$650m/yr, while reduced depreciation & amortization increases EPS. Incorporating estimated related closure costs of $700m (assuming $150m/yr in first three years and $125m/yr in following two) and
  $71m legal loss in 1Q15, [net-present value, or] NPV declines $4/sh to $12/sh. However, we note some potential NPV offsets (not yet considered) include reduced maintenance capex and SG&A costs reduce could provide ~$1/sh tailwind. Should Cliffs be in a position to forego remaining $750m tailings dam capex, NPV could increase a further ~$3/sh…!

  Cliffs' price target of $10 [down from $17. Ed.] is now based on 0.85x (from prior ~1.0x) our revised NPV of ~$12 ($16), calculated under a  discounted cash-flow methodology. Increased net-debt-to-EBITDA is becoming a source concern and reason for applying 15% discount to NPV. Risks include higher-/lower-than-expected iron ore and coal prices, possibility of breaching covenants (on reduced cash flow generation) and increase/decrease of foreign exchange rates, particularly for the Australian Dollar.

  Investors don’t appear too worried today, however. Cliffs shares have gained 6.3% to $8.69 at 1:35 p.m. today, even as BHP Billiton (BHP) has fallen 1.5% to $55 and Rio Tinto (RIO) has dropped 2.4% to $45.07.

• [By Ben Levisohn]

  Last week, Cliffs Natural Resources (CLF) surged after reports that U.S. steel-maker Nucor (NUE) was interested in a joint venturein Cliff’s troubled Bloom Lake project.

  Dado Galdieri

  JPMorgan’s Michael Gambardella and team explain the impact on Cliffs Natural Resources–and why Nucor might be interested:

  Heading into 3Q14 earnings, expectations for the potential value Cliffs could secure from Bloom Lake were negative given its high cost and burdensome rail take-or-pay contracts. However, as noted in our post-earnings report, management stated the Canadian subsidiary (which holds Bloom Lake) could be put into bankruptcy without any recourse to Cliffs. This effectively reset the Bloom Lake value to near zero with a positive upside should a JV be finalized to develop Phase II and take the increased production. A report in the Wall Street Journal refocused sentiment on the potential upside, naming Nucor and two Japanese steel mills as the potential partners in Phase II.

  The company is approaching the one year anniversary of the initial startup for the largest single [direct-reduced iron, or] DRI module in the world located in Louisiana. With deep water access and infrastructure to add a second modul! e, Nucor�! ��s interest in building Phase II centers on the possibility of securing a captive source of iron ore for its DRI capacity along with its fully integrated feed. While Bloom Lake has premium Fe content required to make DRI pellets, it does not have a pellet plant and in the past struggled to balance silica content with production volume and costs. In our view, Nucor's ultimate desire to participate in a Bloom Lake JV is likely contingent on securing low silica (~2%), DRI grade iron ore but would also require the investment to build a pellet plant.

  Shares of Cliffs Natural Resources has dropped 2.1% to $11 at 10:03 a.m. today, Nucor has fallen 1.7% to $53.17.

• [By Jayson Derrick]

  According to The Wall Street Journal, Nucor (NYSE: NUE) is interested in investing in Cliffs Natural Resources (NYSE: CLF) iron ore mine Bloom Lake in Quebec. Shares of Nucor gained 1.87 percent, closing at $54.06 while shares of Cliffs Natural Resources gained 6.95 percent, closing at $11.23.

• [By Chris Mydlo]

  Headlines across the financial news today include a write-down of $6 billion by Cliffs Natural Resources (CLF). The write-down is on its seaborne iron ore and metallurgical coal assets as iron-ore prices have dropped more than 40 percent this year. Based on the more recent quarterly filing ending June 30, Cliffs had a book value of $6.028 billion. Writing down $6 billion will bring the book value to near zero. The company is still going to operate as this is not a cash event and the credit rating was already dropped to junk status (BB-) leading up the event.

source from Top Stocks For 2015:http://www.topstocksblog.com/top-5-consumer-service-stocks-to-watch-for-2016.html