Markets

Cliffs Natural Initiates Production of New Mustang Pellet

Cliffs Natural Resources Inc.CLF recently announced the initiation of production of the new Mustang superflux pellet at its United Taconite mine. The commencement of the new production equipment, including the supporting infrastructure, was on schedule.

The company invested $75 million in cash to build the new storage facility, silos, a limestone crusher, conveyors and rail infrastructure to support the production of the Mustang pellet.

Cliffs has outperformed the Zacks categorized Mining-Iron industry over the past one year. The company's shares have rallied around 121.8% over this period, compared with roughly 105% gain recorded by the industry.

For 2017, Cliffs expects to generate roughly $380 million of net income. The company expects its full-year SG&A expenses to be around $100 million of which $25 million is expected to be non-cash expenses. Also, the company's interest expense for 2017 is anticipated to be roughly $175 million, of which $20 million is expected to be non-cash.

Cliff's remains focused on deleveraging its balance sheet and improving the cost structure. The company's net debt fell to roughly $1.3 billion at the end of first-quarter 2017 from around $1.8 billion at the end of 2016. Cliffs is also committed to increase shareholders returns through dividends and share repurchases.

Moreover, Cliffs is boosting its mining capacity and is expected to benefit from its pellet supply contracts with its U.S. iron ore customers. Cliffs is also focusing on managing costs, evident from a decline in overall cash costs in 2016.

Cliffs should also gain from its supply deals with other companies. The ArcelorMittal (MT) deal allows Cliffs to supply up to 10 million tons of pellets to ArcelorMittal USA. The company also entered into a contract with U.S. Steel Canada to supply pellets. The agreement exceeded the company's original sales expectations. Also, the company is expected to gain from an increased steel demand in the U.S.

However, Cliffs is still faced with a challenging operating environment. The company has also cut its profit guidance for 2017 due to lower expected iron ore pricing. Cliffs now sees net income of roughly $380 million, down from its earlier view of $510 million.

Cliffs Natural Resources Inc. Price and Consensus

Cliffs Natural Resources Inc. Price and Consensus | Cliffs Natural Resources Inc. Quote

Cliffs currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the basic materials space include BASF SE BASFY , The Chemours Company CC and Kronos Worldwide Inc KRO . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

BASF has expected long-term growth of 8.6%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BASF SE (BASFY): Free Stock Analysis Report

Kronos Worldwide Inc (KRO): Free Stock Analysis Report

Chemours Company (The) (CC): Free Stock Analysis Report

Cliffs Natural Resources Inc. (CLF): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BASFY KRO CLF CC

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More