I don't seem to be alone....
Wells Fargo’s Sam Dubinsky thinks Cliffs Natural Resources’ (CLF) decision to eliminate its dividend reinforces management’s credibility problem:
The dividend cut was not a surprise to use given deteriorating market conditions and financial performance, but highlights recent credibility issues of new management. However, credibility remains an issue as the CEO stated he believed the dividend would be secure. Note the company also provided a number of targets for the Canada restructuring and to date results have been disappointing (no buyer was found, shutdown costs are high, news of placing the asset in bankruptcy with minimal recourse continue to resurface but no progress has been made yet)…
While our bear thesis on Cliffs Natural Resources has been playing out, we do not see a catalyst for a recovery in iron ore prices, see too much risk from the ArcelorMittal (MT) contract renegotiation, and view valuation on shares as expensive (9x EBITDA on not necessarily conservative estimates).
Citigroup’s Brian Yu thinks Cliffs is a Sell as long as iron-ore prices remain low:
Cliffs Natural Resources remains Sell-Rated based on our Commodity Team’s forecast for iron ore to average $58/tonne in 2015 with an average quarterly low of $53/tonne in 3Q15 and high of $66/tonne in 1Q15.
Shares of Cliffs Natural Resources have dropped 2.1% to $7.33 at 1:58 p.m., while ArcelorMittal has gained 3.1% to $9.57.
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