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The Weight of China Is Too Much for These Companies

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By Taylor Muckerman and Joel South, The Motley Fool

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It was a long and arduous day for materials producers’ stocks yesterday. Many of them fell more than 5% after news that China‘s GDP growth landed short of the world’s hopes. Accounting for around 40% of all metal demand, China shares the demand podium with no one. This was made crystal clear even after announcing 7.7% growth.

Investors in commodity producers must have cringed after checking their portfolios once the closing bell tolled the end of trading Tuesday in the U.S. Some key players on the global level had begun sliding before yesterday’s added push. Are materials stocks worth a look now? Well, that all depends on your outlook for several of the materials that are critical components of global growth. For our analysts’ take, check out the video below.

Cliffs Natural Resources has grown from a domestic iron ore producer into an international player in both the iron ore and metallurgical coal markets. It has also underwhelmed investors lately, especially after its dramatic 76% dividend cut in February. However, it could now be looked at as a possible value play due to several factors that are likely to remain advantageous for Cliffs’ management. For details on these advantages and more, click here now to check out The Motley Fool’s premium research report on the company.

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From: http://www.dailyfinance.com/2013/04/17/the-weight-of-china-is-too-much-for-these-companie/

Business, Finance, Occupation & Industry

Breathe Easy: Natural Gas Is Lowering CO2 Emissions

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By Arjun Sreekumar, The Motley Fool

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America’s shale gas revolution is already paying off big time. Not only has it been a boon to consumers and companies who use natural gas for heating their homes and offices, it also appears to be benefiting the environment. Let’s take a closer look.

EIA reports lower CO2 emissions
Last week, the U.S. Energy Information Administration (EIA) reported that U.S. energy-related carbon dioxide emissions for 2012 fell to 5.3 billion tons – the lowest level in nearly two decades. What’s more is that since 2007, emissions have declined consecutively each year, with the exception of 2010. The reason?

The EIA attributed the decline in CO2 emissions primarily to the shift away from coal, the most carbon-intensive fossil fuel, and toward natural gas, the least carbon-intensive fuel, for electric power generation. Less demand for transportation fuels and relatively weak demand for winter heating also played a role in driving emissions lower.

Coal-to-gas switching
Over the past few years, the transition toward natural-gas-fired plants and the retirement of older, coal-powered plants has been an unmistakable trend among utility companies.

For the better part of the past couple of decades, coal traded at a substantial discount to natural gas on an energy equivalent basis. In fact, it held up as the least expensive thermal fuel in the U.S. over that time period.

But all that changed in 2011, as natural gas prices slipped below $3 per Mcf that November. The downward trend in prices continued until spring of 2012, when gas hit a decade low of around $1.82 per Mcf on April 20.

Massively discounted gas prices drove utility companies with the flexibility to rebalance their production mix to burn more natural gas and less coal. In the first half of 2012, when natural gas was especially cheap, several utilities announced plans to curtail coal-powered generation in favor of gas-fired plants.

For instance, Southern Company‘s share of coal used for total power generation fell from 70% to 30%, while the share of natural gas rose from 11% to 47%. Not surprisingly, the company ended up burning more natural gas than it did coal for the first time in its century-long history.  

Impact on coal producers
As increasing numbers of utility companies made the switch to natural gas, the price of thermal coal – the varietal used mainly for power generation – plummeted, leading many producers to reduce production drastically and, in many cases, lay off workers.

For instance, in the second quarter of last year, Arch Coal shuttered four thermal coal mines in Appalachia and idled another, as it struggled to cut costs in the face of falling demand for thermal coal. Not long after, in September, Alpha Natural Resources announced that it would idle mines in Pennsylvania, West Virginia, and Virginia and lay off almost 10% of its employees.  

However, some coal producers, such as Cliffs Natural Resources and Peabody Energy , fared relatively better due to the

From: http://www.dailyfinance.com/2013/04/11/breathe-easy-natural-gas-is-lowering-co2-emissions/

Business, Finance, Occupation & Industry

Dow May Open Higher After Alcoa Beats the Street

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By Roland Head, The Motley Fool

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LONDON — Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average may open 12 points higher this morning, while the S&P 500 may open up by 0.19%.

Markets in Europe edged higher this morning after U.S. aluminum giant Alcoa beat earnings forecasts and China reported that inflation fell further than expected in March, boosting hopes that the Chinese government will continue its monetary-stimulus efforts. Among the biggest risers were mining shares, which helped lift the FTSE 100 by 0.47% by 7:20 a.m. EDT. In Europe, a new OECD report sounded a warning that Slovenia could soon follow Cyprus into bankruptcy if its banking sector is not recapitalized. In the U.K., new figures showed that exports fell by 2.8% in February, while industrial output rose by 1%. German exports also fell: Exports from Europe‘s biggest economy were down by 1.5% in February, while imports fell by 3.8%.

Today’s U.S. economic reports include the NFIB small-business index for March, which fell from 90.8 in February to 89.5, slightly ahead of expectations of 89.2. At 10 a.m. EDT, wholesale inventories are expected to have risen by 0.6% in February after gaining 1.2% in January. February’s Job Openings and Labor Turnover Survey is also due at 10 a.m. EDT.

Last night Alcoa reported first-quarter adjusted earnings of $0.11 per share on sales of $5.83 billion, beating analysts’ expectations for adjusted earnings of $0.08 per share but missing the $5.88 billion consensus forecast for revenue. Alcoa is widely seen as a predictor for the wider market, and despite the revenue miss, these results have been seen as a ‘beat’ and raised hopes that corporate earnings will be stronger than expected across the S&P 500.

Other stocks that may be actively traded today include J.C. Penney. The retailer’s shares were 8.66% lower in premarket trading this morning after the company announced last night that CEO Ron Johnson will leave the company after less than two years in the post to be replaced by his predecessor, Mike Ullman. J.C. Penney’s stock price has halved since former Apple exec Johnson took control, and his turnaround plan is now widely seen as a failure that has alienated loyal customers without attracting new ones. Iron ore miner Cliffs Natural Resources was also higher in premarket trading following gains for commodity stocks in Europe.

Finally, let’s not forget that the Dow’s daily movements can add up to serious long-term gains. Indeed, Warren Buffett recently wrote, “The Dow advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions.” If you, like Buffett, are convinced of the long-term power of the Dow, you should read “5 Stocks To Retire On.” Your long-term wealth could be transformed, even in this uncertain economy. Simply click here now to download this free, no-obligation report.

The article Dow May Open Higher After Alcoa Beats the Street originally …read more

Source: FULL ARTICLE at DailyFinance

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Is Caterpillar Digging Itself a Deeper Hole?

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By Rich Duprey, The Motley Fool

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Just days after announcing cuts of up to 300 employees at its South Milwaukee facility that it acquired from Bucyrus, heavy-equipment manufacturer Caterpillar laid off 460 workers at its Decatur, Ill., plant, again citing mining industry weakness. The Decatur plant is a manufacturing facility that runs a foundry, overhaul, and remanufacturing, and where the South Milwaukee layoffs have been deemed temporary, these are said to be permanent. All told, the company wants to eliminate about 2,000 jobs.

A deep hole
Caterpillar identifies coal, iron ore, gold, copper, and oil and natural gas as primary users of its equipment, so it’s easy to see why the equipment maker is taking it on the chin. Mining companies are abandoning the coal industry in droves.

Rio Tinto recently announced its intention to sell off its Australian coal assets while also seeking “strategic alternatives” for its copper and gold mines. Despite global financial turmoil, gold is incongruously slipping as a safe haven, as billionaire investor George Soros recently pointed out.

While I see that as a temporary response to the currency destruction being engineered by central bankers — people only have their gold to sell to get cash, so it’s depressing the price — BHP Billiton is also looking to strip away things it now considers unessential to its main operations, and it has idled a number of coal mines and is looking to shed oil and gas assets because they’re deemed the easiest to get rid of. Cliffs Natural Resources is idling iron pellet facilities because of weakness in the steel industry.

Demand an answer
As I noted over the weekend, fourth-quarter coal consumption in the U.S. tumbled 11%, according to the Energy Information Administration, and production was down 12%. It’s not looking much better in steel.

The World Steel Association says that while China‘s crude steel production jumped nearly 10% in February, it was down almost everywhere else in the world, with the U.S. experiencing an 11.8% falloff, amounting to a 1.2% global increase in production. But with demand falling, we’re going to see weak pricing rule the day.

While natural gas prices have rebounded in recent weeks to above $4 per million Btus, they fell again last week, settling right at $4 at Henry Hub but down to $3.90 on the NYMEX. And as mild weather spreads across the country, it’s likely they’ll fall below that threshold again, even as the number of natural gas rigs in operation has dropped below 400 for the first time since 1999.

Strength in numbers
Joy Global is the world’s second largest mining-equipment manufacturer, and it relies even more so on the coal industry’s health than Caterpillar does, with two-thirds of its sales coming from coal miners. It cut several hundred jobs late last year, and in its first-quarter conference call in February, the equipment manufacturer pointed to a 27% decrease in books, as original equipment orders dropped 30% and it saw aftermarket orders cut …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Steel Yourself for Change at Rio Tinto

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By Rich Duprey, The Motley Fool

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Having a finger in many pies is no longer the way Rio Tinto wants to operate anymore. It may have had diversified mining interests in the past, but new management has it focused on just one task now, and it is quickly putting up the “for sale” sign on anything that doesn’t align with that vision.

Down the mine shaft
After posting its first-ever full year loss in February — and a $3 billion one at that — newly hired CEO Sam Walsh is set on doing what’s necessary to turn the miner around, and that apparently means jettisoning everything that doesn’t make it money.

While iron ore has always been Rio’s biggest operation, accounting for nearly half of its $51 billion in annual revenues, it’s also been its sole money maker generating 80% of its pre-tax profits. It’s natural that iron ore will be what’s left after it sells off a lot of its other assets. It recently announced its intention to put a shingle out for its Australian coal assets and its hired advisors to find a buyer for its copper and gold mines down under. Its aluminum mining business has been up for sale for two years now.

BHP Billiton finds itself in an extremely similar situation: a new CEO and plans to divest itself of non-core assets. Analysts think the miner could realize as much as $25 billion from a sale while Rio Tinto may be able to book $10 billion or more. BHP has already sold off some $4.5 billion worth in four sales since last August and has idled a handful coal operations in recent months.

A dirty word
Coal is just not a healthy business. Consumption in the U.S. fell by 11% in the fourth quarter of 2012, according to the Energy Information Administration, while production was down 12%. Some 90% of coal gets burned to produce power, yet electricity use is down 2% over the past five years. Even so, the shale natural gas boom has made natural gas more competitive just as coal was looking cheap. Without the same stigma associated with it as coal, natural gas has led more utilities to switch from coal-fired plants to gas-fired ones, with tthe pace of divestiture is quickening.  

Dominion Resources agreed just last month to sell interests in three power plants to private equity, while Ameren is unloading five coal-fired plants to Dynegy.

Yet Rio Tinto‘s bet on iron ore isn’t a slam dunk, either. Goldman Sachs recently forecast falling prices as demand and steel production drop in China, the largest market for iron ore and Rio’s biggest geographic segment. Ore imports fell to 56 million tons in February, down from 65 million in January. Cliffs Natural Resources is idling an iron ore pellet plant in Canada because of falling prices.

The admonition to do one thing and do it well just might not be the salve that Rio Tinto needs to …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Iron Ore About to Get Mauled by Bear Market

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By Rich Duprey, The Motley Fool

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Could the timing be any worse? Just as Rio Tinto and BHP Billiton are shedding assets to focus more intently on their iron ore business, analysts at Morgan Stanley say the whole industry is about to get dusted from a supply glut. It anticipates that inventories will widen next year and expand through 2018, causing prices to tumble by more than a third just this year alone.

Hitting the brakes on the Orient Express
Of course, the miners aren’t helping themselves, as each is bringing new mines online in Australia, along with top iron ore miner Vale opening one up in Brazil. Even though China‘s steel mills still have a voracious appetite when it comes to the ore, analysts expect that industry output will grow by only 2.6% this year, so it won’t be enough to offset rising surpluses. Even China‘s own development and economic planning agency says the country will experience a surplus of 20 million tons, as it will import only about 4% more than it did last year.

China‘s economic growth has been slowing, and even though economists predict that GDP will expand beyond 8% this year, that’s still a good deal below the better than 10% annual growth it’s enjoyed for the past decade.

Anticipating the weak market, Cliffs Natural Resources announced last month that it will idle its Wabush Pointe Noire pellet plant in Sept-Iles, Quebec, by the end of the second quarter of 2013. One analyst frets that it will also need to sell its Australian iron ore assets to help pay down some of the $3 billion worth of debt it carries on its balance sheet.

The end is nigh
Morgan Stanley says 2013 will actually experience a supply deficit of around 81 million tonnes of iron ore, but next year it will grow to a 3.3 million tonne surplus and continue widening until it is 291 million tonnes in 2018. 

Factors that might mitigate when, or even if, the glut materializes include the length of time it takes to bring new mines online, but perhaps more crucial will be India‘s turning from a net exporter of iron ore into a net importer. The Wall Street Journal reports that mining interests in the subcontinent worry that they won’t be able to export anything because the country’s Supreme Court keeps rolling out export bans during a probe into illegal mining.

Despite all the doom and gloom, iron ore prices at $139 a ton have held up remarkably well, but Bloomberg believes that based on consensus analyst estimates, it could hit $90 a ton by year’s end.

Iron Ore Spot Price (Any Origin) data by YCharts.

Down a mine shaft
Shares of miners have not fared as well, with BHP down 15% from its 52-week high, Rio off 22%, and Vale losing a quarter of its value. Cliffs has performed the worst of the bunch, with its stock down more than 72%. 

If the industry holds even …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

4 Stocks That Have Gotten Cut in Half in 2013

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By Dan Caplinger, The Motley Fool

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The stock market is trading at record highs, and many investors have cashed in on the market‘s gains. But some companies haven’t let their shareholders join the party, as they’ve not only missed out on the big bull rally but have seen their shares plunge precipitously.

Let’s take a closer look at four stocks that have lost half their value so far this year and the reasons for their respective downfalls.

Atlantic Power — down 54%
Atlantic Power is a small utility that has gotten a lot bigger in recent years by making numerous acquisitions. Until last month, the company was a favorite among dividend investors, with monthly payouts that equated to a 10% yield for shareholders adding onto solid share performance from late 2009 through the third quarter of last year. But the cracks started appearing last November, when the utility missed quarterly estimates on earnings and sales.

At the beginning of March, the real plunge came for Atlantic Power, as it not only reported a much worse loss than in the previous year but also slashed its dividend by two-thirds. That sent the shares down 30% in a single week and left many dividend investors with far less reason to hold the stock. The lesson: Some lucrative dividends are simply unsustainable.

Cliffs Natural Resources  — down 53%
Cliffs Natural specializes in iron ore and metallurgical coal production. During better times, those key components for steelmaking were in high demand, allowing Cliffs to pay a high dividend and enjoy strong growth prospects. But in February, Cliffs shares lost a quarter of their value in a single day as Cliffs cut its quarterly dividend payout by more than 75%, citing extremely weak prices for both iron ore and coal. It also announced secondary share offerings — never a pretty sight after a big share-price plunge.

Now, many analysts doubt whether iron ore prices will bounce back anytime soon. Meanwhile, Cliffs’ operational challenges could continue to weigh on the company’s financials going forward. With the company planning to idle an iron-pellet plant in Quebec by the end of this quarter, Cliffs doesn’t seem to foresee better times in the immediate future.

Allied Nevada Gold — down 52%
Unlike Cliffs and Atlantic Power, Allied Nevada has fallen fairly steadily during 2013. In mid-January, the precious-metals miner gave 2013 guidance for 225,000 to 250,000 ounces of gold and 1.5 million to 1.8 million silver ounces at its Hycroft mine, implying solid growth but still disappointing investors, who sent shares down 5% after the announcement. The company’s full quarterly report in late February only added to the pessimism, as it increased its capital expenditure estimates.

In general, mining companies have faced high production costs and pressures from stalling gold and silver prices. Allied Nevada‘s 11% drop yesterday alone reflected further declines in precious metals. Until those prices reverse course, Allied Nevada will have trouble bouncing back.

Millennial Media …read more
Source: FULL ARTICLE at DailyFinance

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Which Bottom-5 S&P 500 Stock Has the Best Chance to Bounce Back?

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By Sean Williams, The Motley Fool

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The market has seen an incredible run off its lows over the past four years. Chances are good that if you’ve owned a diversified portfolio of investments, you’re sitting on a handsome return. However, it wasn’t all sugar and spice for a handful of companies within the broad-based S&P 500 in the first-quarter. The index closed at an all-time high on Thursday, but these five companies were the worst of the worst in the first quarter. The good news is that one has a very good chance at rebounding in the second quarter.

Cliffs Natural Resources (50.5%)
It was a horrendous quarter for Cliffs, a miner of iron ore and metallurgical coal, which lost half of its value. A cornucopia of analyst downgrades shelled the company after it reduced its quarterly dividend by a whopping 76% to $0.15 from $0.625. The most recent downgrade came courtesy of Morgan Stanley, which warned that new iron ore supplies in the U.S. may reduce iron ore pricing. Iron prices are well off their highs of $187 per dry metric ton, but they’ve also crept off their recent lows of just $99 per dry metric ton set last September. 

J.C. Penney (23.3%)
As unbelievable as this might be, struggling retailer J.C. Penney shed only 23% in the first quarter despite reporting what I deemed to be the worst retail quarter ever. Its fourth-quarter report highlighted a 28.4% decline in total sales, a nearly 32% drop in same-store sales, and a 34.4% tumble in direct-to-consumer sales. Penney CEO Ron Johnson has backtracked on the company’s no-sale pricing policy, but it remains to be seen if customers will return or if the damage has already been done. 

Peabody Energy (20.3%)
It definitely wasn’t a kind quarter to coal producers, with Peabody shares shedding 20% after reporting dismal fourth-quarter results in late January. Coal prices have been under serious pressure because of low-cost natural gas, which has persuaded electric utilities to make the long-term switch from coal to natural gas. Reduced stockpiles of coal have helped somewhat stabilize prices, but the prospect of higher costs in its Australian mines and stagnant coal prices didn’t sit well with its shareholders this quarter.

U.S. Steel (18.1%)
Another underperformer, another commodity-based company! This time it’s U.S. Steel, which saw its shares dip by 18% on the quarter as weak steel prices and tempered demand both domestically and overseas weighed on results. For 2012, U.S. Steel’s net loss widened to $124 million from $53 million in the previous year, but that’s primarily attributed to a whopping $353 million loss on the sale of U.S. Steel Serbia.

Garmin (17.9%)
Finally, navigation and GPS device maker Garmin shed nearly 18% during the quarter after its full-year outlook failed to impress investors. Garmin forecast a profit of just $2.30-$2.40 for the year on revenue of $2.5 billion to $2.6 billion as …read more
Source: FULL ARTICLE at DailyFinance

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The Resurgent Dollar Could Hurt S&P 500 Earnings

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By The Associated Press

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By STEVE ROTHWELL

NEW YORK — The dollar is rising again.

After a drop last autumn, the U.S. dollar has climbed 5 percent against other currencies over the past two months, reaching the highest level since August.

The main reason is the recovery in the U.S. economy. Although growth is still weak, the outlook for the U.S. is better than elsewhere in the developed world. Europe is stuck in a recession and struggling to control its debt. Japan is trying to push down the value of the yen to boost exports and end deflation.

A strong dollar helps Americans by making imports cheaper and curbing inflation, but it can also hurt U.S. companies. Technology companies have become increasingly reliant on overseas sales, and a stronger dollar reduces the value of their overseas earnings.

The impact of the dollar’s appreciation is starting to show up in earnings reports. The insurer Aflac, which does much of its business in Japan, says its earnings were hurt as the yen fell against the U.S. currency. Procter & Gamble, which makes Gillette razors and Crest toothpaste, said the stronger dollar was holding back its sales growth.

Many analysts predict that the dollar will continue to rise. Here’s a look at what a stronger dollar means for investors.

Tough for Tech and Materials Makers

A rising dollar could spell trouble for U.S. companies that make software and gadgets, as well as companies that make basic materials like aluminum.

The tech industry relies heavily on foreign sales for growth. About 56 percent of its revenue comes from outside the U.S., according to research by RBC Capital Markets. As the dollar strengthens, U.S. goods become more expensive overseas, discouraging buyers.

Investors worry that could slow business — and profits. As a result, technology companies are tied with materials makers as the worst industry in the S&P 500 this year, rising just 4.2 percent, compared with 10 percent for the overall market. Business software giant Oracle said its most recent earnings report on March 20 that the rising dollar lowered its earnings by about two percent.

The materials industry, which includes Dow Chemical and miner Cliffs Natural Resources, also gets more than half of its sales overseas.

“We would be wary of sectors that derive a lot of their sales overseas, given that fact that we expect the dollar’s strength to remain,” says Kristen Scarpa, an investment strategist at Barclays Wealth and Investment Management.

Commodity Concerns

When the dollar appreciates, it makes commodities like oil and metals — which are priced only in dollars — more expensive for customers who buy them with other currencies like the euro and the yen.

That can weaken demand for commodities, hurting the profits of the companies that produce them, like oil producers Exxon Mobil, …read more
Source: FULL ARTICLE at DailyFinance

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Investors Did a Run on These 3 Stocks

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By Rich Duprey, The Motley Fool

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With the terms it placed on Cyprus, the eurozone has its template for future bailouts in place, and depositors in countries with their own shaky finances will be wary about bearing the brunt of the next crisis.

Some stocks had shaky weeks of their own, even though they’re unrelated to the global financial problems. Don’t to running over the cliff with them like a bunch of lemmings, as this could just be a temporary situation. So let’s first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Falling off a cliff
Shares of iron ore miner Cliffs Natural Resources fell 14% earlier this week to levels it hasn’t seen since the recession, as analysts at Morgan Stanley and Credit Suisse drastically cut their price targets. Following the miner’s just-as-dramatic slashing of its dividend by 76%, the analysts at both investment houses cut the stock by more than 60% from their previous price target. Morgan Stanley dropped Cliffs’ shares to $14 a stub, and Credit Suisse took it down to $10.

On the bright side, Goldman Sachs raised its outlook from “sell” to “neutral,” but that was hardly enough to outweigh the pall hanging over the miner. In general, analysts expect its iron ore business to be cut in half in 2013 and its pricing power to come under tremendous pressure. Earlier this month, Cliffs announced that it was idling its Quebec iron ore pellet plant to meet the market‘s lower demand.

With the global steel industry wobbling despite expectations that Chinese production will increase 4% this year, Cliffs’ largest customer, ArcelorMittal , is melting down as well. The world’s largest steelmaker accounts for 17% of Cliffs’ total revenues and a third of its U.S. business and has seen its stock lose a quarter of its value in 2013.

Last fall, I believed that most of the risk had been priced into Cliffs’ own stock, but shares are down 58% since then and don’t seem to have reached bottom yet. While it amounts to a bit of closing the barn door after the cows have escaped, I’ll be closing out my outperform rating on Motley Fool CAPS.

Big pay day
Easy come, easy go, or so say investors in American Apparel , which saw their stock jump more than 12% the other day on no company-specific news and then give a good portion of it back for pretty much the same reason. There was, however, an article that appeared in the trade rag WWD that the retailer’s chairman and CEO was being richly rewarded this year with a pay increase from $800,000 to $2 million cash. While sales rose 6% in the most recent quarter, company losses narrowed only slightly.

The stock, however, has more than doubled since the start of the year and has nearly tripled from its 52-week low. After the stock wallowed in penny-stock status because of …read more
Source: FULL ARTICLE at DailyFinance

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Cliffs Rebounds, and the Dow Ends Higher

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By John Divine, The Motley Fool

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In the final trading day of the first quarter — the markets will be closed tomorrow for Good Friday — Wall Street had a handful of catalysts to drive it higher. A secular rebound in the housing market, coupled with continued Federal Reserve stimulus measures and increasing corporate profits, helped drive the Dow Jones Industrial Average 52 points, or 0.36%, higher, to end at 14,578. 

A Wall Street Journal article highlighting the quickly growing demand for supercomputers — sales for the high-end machines surged nearly 30% last year to reach $5.6 billion annually — bodes well for International Business Machines , which added 1.1%. Big Blue makes a chip for supercomputers that uses less electricity than other competitors; that’s a major advantage, as extra performance tends to require a very high level of electricity to function.

One of the biggest energy companies in the world, Chevron , declined 1.1%, to end Thursday as the worst-performing blue chip stock. Investors may be selling off after comments from Utah’s Governor that essentially promised that the state would be forcing Chevron to clean up its most recent spill in the state. It’s the third Chevron spill in Utah in three years, causing the governor to chastise federal environmental regulators, and take a hard line against the pipeline operator.

Fossil fuel refiner and marketer Phillips 66 added 2.5%, after agreeing to raise around $300 million in an IPO that will sell off a small part of its current business that deals with the operation and development of a variety of its midstream assets. It didn’t hurt, either, that Phillips has been on a roll all this year: its stock is up more than 30% in the first quarter alone.

Lastly, shares of Cliffs Natural Resources rose 3%, bouncing back from a dismal showing yesterday, where shares ended as the worst performers in the entire S&P 500. After Wednesday’s monumental 13.9% haircut, the extreme bearishness on the heels of a scathing analyst downgrade yesterday brought out bargain hunters today, which helped the stock gain a small portion of its losses back.

Cliffs Natural Resources has grown from a domestic iron ore producer into an international player in both the iron ore and metallurgical coal markets. It has also underwhelmed investors lately, especially after its dramatic 76% dividend cut in February. However, it could now be looked at as a possible value play, due to several factors that are likely to remain advantageous for Cliffs’ management. For details on these advantages and more, click here now to check out The Motley Fool’s premium research report on the company.

var FoolAnalyticsData = FoolAnalyticsData || []; …read more
Source: FULL ARTICLE at DailyFinance

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Has Cliffs Natural Resources Finally Hit Rock Bottom?

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By Matthew DiLallo, The Motley Fool

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It’s been an ugly year for investors in Cliffs Natural Resources . The free fall in the company’s shares just doesn’t want to end — shares were hammered again following a downgrade by Morgan Stanley. Is this the final nail in the coffin or have Cliffs’ shares finally hit bottom?

For whatever reason, the Morgan Stanley downgrade appears to have come as a surprise to the market, which sent shares down by double digits. Maybe it’s the fact that the price target was cut all the way to $14 a share. Maybe it’s the language citing deteriorating market conditions in the company’s core iron ore market. Whatever the reason, the stock took another big drop.

Cliffs, as some might remember and others want to forget, was at more than $70 stock this time last year. Those holding on to hope that the stock can someday make its way back should take a look at what Morgan Stanley had to say about the company. For starters, it sees the company’s core iron ore business being cut in half in the coming years as new supply begins to come on line. That new supply would affect both volumes and pricing for the beleaguered miner. According to Morgan Stanley is that this would obliterate about 30% of Cliffs’ bottom line.

However, Morgan Stanley isn’t the only big Wall Street bank throwing around its weight when it comes to having an opinion on Cliffs. Goldman Sachs actually upgraded the stock, though it’s mainly a valuation call. According to Goldman, the company shored up its liquidity after cutting the dividend and issuing equity while also idling a high-cost plant. It thinks the company’s risks are already priced into the stock and are basically calling the bottom.

So who are you to believe? When it all comes down to it, the overarching problem is that Cliffs’ cost of production is too high, especially when compared to global giants BHP Billiton and Rio Tinto . These two can remain profitable even if iron ore prices continue to fall. Meanwhile, with its debt load weighing the company down, Cliffs’ investors could be left with a worthless stock.

While I don’t think that’s a likely scenario, I’m not inclined to be a buyer, even at these levels. High cost of production and heavy debt levels typically don’t end well. Further, Cliffs simply doesn’t have the commodity diversity to weather these storms as well as its more diversified global peers. Sure, a pure play is a great investment when a cycle turns up, but its not a great play for someone who wants to sleep at night knowing their investments are safe. 

Personally, the risk-reward balance isn’t enticing enough, especially when there are so many questions surrounding the company’s future profitability. I’d much rather stick with a diversified global miner than take a flier on a company that just might have further to fall. 

There’s a lot more to the story. Cliffs Natural …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Stocks Try To Rally Out Of The Red, But Cliffs Natural A Lost Cause

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By Steve Schaefer, Forbes Staff Wall Street was giving back some of Tuesday’s advance Wednesday, but with less than an hour left in the session the market nearly clawed its way out of the red. One stock not participating though was Cliffs Natural Resources. …read more
Source: FULL ARTICLE at Forbes Latest

Business, Finance, Occupation & Industry

Why Cliffs Natural Shares Plunged Again

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By Brian D. Pacampara, The Motley Fool

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of Cliffs Natural Resources sank 13% today after a Wall Street analyst downgraded the iron ore miner from equal-weight to underweight.

So what: Along with the downgrade, Morgan Stanley cut its price target on the stock to $14 a share, representing a whopping 35% of downside to yesterday’s closing price. Although the stock has already been walloped over the past year, Morgan Stanley believes that the deteriorating U.S. iron ore market and Cliffs’ depleting reserves are still not fully baked into the price.

Now what: Expect the short term to remain extremely turbulent. “We believe that the supply demand balance in the isolated Great Lakes pellet market will deteriorate as up to ~13 mt of new supply comes online over the next ~3 years in a ~60 mt market,” wrote Morgan Stanley in a note. “As the only non-steelmaking producer in the region, we believe [Cliffs] will be most affected. US Iron Ore segment EBITDA could halve vs. 2012 levels.” Of course, with the stock now down a staggering 80% over the past year, long-term bargain hunters might want to take a closer look.

Interested in more info on Cliffs? Add it to your watchlist.

The article Why Cliffs Natural Shares Plunged Again originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Commercial Metals Earnings: An Early Look

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By Dan Caplinger, The Motley Fool

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Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and Commercial Metals is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Commercial Metals is in the middle of a tough industry, with its emphasis on steel and metal products. But the company’s unique angle gives it a big advantage over most of its peers. Let’s take an early look at what’s been happening with Commercial Metals over the past quarter and what we’re likely to see in its quarterly report on Thursday.

Stats on Commercial Metals

Analyst EPS Estimate

$0.18

Change From Year-Ago EPS

(25%)

Revenue Estimate

$1.86 billion

Change From Year-Ago Revenue

(4.9%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Commercial Metals cash in this quarter?
Analysts have given a mixed picture of earnings prospects for Commercial Metals over the past few months, reducing their calls for the most recent quarter by a nickel per share but raising full-year fiscal 2013 estimates by $0.03 per share. The stock has taken the more bullish view, rising about 10% since late December.

The steel industry has been a tough place to make money lately, both for companies that make steel and those that provide raw materials for steel production. Iron ore and metallurgical coal producer Cliffs Natural Resources has been one of the hardest-hit stocks of 2013, losing nearly half its value after slashing its dividend by more than 75% due to low prices and negative prospects. Similarly, steel produce U.S. Steel has had to navigate weak end-markets that are suffering from worldwide slowdowns in construction activity and questionable economic futures for the countries that have until now had the heaviest demand for steel.

But Commercial Metals has a different approach. In addition to maintaining its own mills, Commercial Metals also collects and processes scrap metal for use by its customers in making new metal products. That’s not a guaranteed money-making strategy, but because the prices it pays for scrap tend to track what it can receives in revenue, Commercial Metals has been more consistently profitable than traditional producers.

Commercial Metals faces a big challenge because of its substantial debt. Without plentiful free cash flow to maintain that debt, Commercial Metals has to hope that a recovery in its end-markets will boost its prospects.

In its quarterly report, watch for Commercial Metals to discuss the trends among its steel-producing customers. Many investors are pointing to the housing …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

How the S&amp;P's Top Dividend Stocks Have Fared in 2013

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By Dan Caplinger, The Motley Fool

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Many income-seeking investors look for stocks that will maximize their current income from dividends. The popular “Dogs of the Dow” strategy has become popular in part because of its simplicity, and even though it hasn’t always resulted in better returns than the overall Dow, it nevertheless places the emphasis on dividends that many investors value.

But there’s no magic to restricting your use of high-dividend stocks to the Dow. Today, let’s look at the stocks within the S&P 500 that had the highest yields as of the beginning of 2013 to see how they’ve fared so far this year.

Some big winners …
The S&P 500 stock with the highest yield has also been one of its best performers this year. Pitney Bowes has risen 45% since starting out the year with a dividend yield of more than 14%, doing a good job of reversing a share-price plunge of more than 40% during 2012 as it struggled to find a viable transition beyond its once-dominant postal-meter business. Yet when Pitney Bowes announced earnings in late January, it managed to limit revenue losses to just 1%, topping estimates and sending the stock soaring. Still, in the long run, it will need to succeed with its broader enterprise-communications strategy if it wants to sustain its high payout, which even now still yields 10%.

But the biggest gainer among top-yielding S&P stocks has been Best Buy , which is up 94% year to date. The company started off January with positive holiday sales news, and even though the big-box electronics retailer reduced its free cash flow projections, shares started moving higher. Since then, the bull run has gained steam, as Best Buy announced full quarterly results in early March and gave initiatives that it hopes will end the practice of showrooming that has hurt the company so much in the past. As optimism about the stock has built, investors have relied less on the idea that co-founder Richard Schulze would take Best Buy private and instead have jumped onto the turnaround bandwagon.

 … and losers
But not all of the S&P’s big dividend payers have fared as well. Cliffs Natural Resources came into 2013 with a 6.5% dividend yield, but that payout didn’t survive the company’s quarterly earnings report. Because of rock-bottom iron ore and metallurgical coal prices and weak demand for the key ingredients for steel production, as well as operational problems that have forced reduced expectations from its key mines, Cliffs had to cut its dividend by more than 75%. As a result, the stock has plunged 46% so far this year, and its forward dividend yield has dropped to below 3%.

The other big dividend cut among the top S&P yielders came from CenturyLink , which had a 7.5% dividend yield at the beginning of the year and has fallen by 9% since then. The high-yielding rural-focused telecom company reduced its dividend …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Cliffs Natural Is Too Cheap to Pass Up

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By Brian D. Pacampara, The Motley Fool

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, iron-ore miner Cliffs Natural Resources has earned a respected four-star ranking.

With that in mind, let’s take a closer look at Cliffs and see what CAPS investors are saying about the stock right now.

Cliffs facts

Headquarters (founded)

Cleveland (1847)

Market Cap

$3.0 billion

Industry

Steel

Trailing-12-Month Revenue

$5.9 billion

Management

Chairman/CEO Joseph Carrabba

CFO Terrance Paradie

Return on Equity (average, past 3 years)

15.4%

Cash/Debt

$195.2 million / $4.3 billion

Dividend Yield

2.7%

Competitors

Alpha Natural Resources

CONSOL Energy

Peabody Energy

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 1,589 members who have rated Cliffs believe the stock will outperform the S&P 500 going forward.

Just last month, one of those Fools, bostonjohn, tapped Cliffs as a particularly enticing turnaround opportunity:

The 52-week range as well as the historical range should provide at least 100% upside.

It has been taking a beating from missing projected revenue targets the past few quarters, but it produces the iron to make steel in emerging market powerhouses like Asia.

The technicals may not look sound now, but give it a couple years and you’ll see the profits from increased infrastructure in the emerging markets. I’d rather invest when there’s blood in the water than when everything looks great.

If you want market-beating returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, Cliffs may not be your top choice.

We’ve found another stock we are incredibly excited about — excited enough to dub it “The Motley Fool’s Top Stock for 2013.” We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won’t be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why Cliffs Natural Is Too Cheap to Pass Up originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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b.type=”text/javascript”;b.async=!0;b.src=(“https:”===c.location.protocol?”https:”:”http:”)+
…read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Caterpillar Sagged on a Flat Day for the Dow

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By Dan Caplinger, The Motley Fool

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For the first time in a while, no one today was seriously talking about new record highs for the stock market. Even positive news on the housing front wasn’t enough to dispel worries about the ongoing banking crisis in Cyprus and the possible reaction of the Federal Reserve, which is meeting today and tomorrow to discuss interest-rate policy. After seeing significant gains give way to losses by noon, the Dow Jones Industrials ended up splitting the difference, rising just 4 points as the S&P 500 and Nasdaq both dropped modestly.

For Caterpillar , though, the Dow’s bounce didn’t lift its shares too far, as it finished with a loss of almost 1.25%. The ongoing disparity between a strengthening recovery in the U.S. and troubling trends in international markets has caused problems for the construction-equipment maker, which has identified the Chinese market as a key element of its overall growth strategy. Without improvement not just in the U.S. economy but throughout the world, Caterpillar will have a tough time dispelling the concerns investors have about the company — especially since Caterpillar itself hasn’t hesitated to pipe up with warnings about the fragile state of the global economy.

Alcoa also fell almost 1%, with the aluminum company facing similar macroeconomic concerns. But news from Japan that buyers agreed to accept aluminum shipments during the second quarter of 2013 at premiums of nearly $250 per metric ton was seen as positive, having risen from the first-quarter premiums of $240 to $245. Still, the levels aren’t as high as record levels near $255 from 2012’s fourth quarter, and some analysts point to the probability that producers will have to accept lower premiums for some buyers that are still holding out.

Outside the Dow, Cliffs Natural Resources fell more than 6% to a new multiyear low, as Goldman Sachs added its own negative sentiment to the chorus of investors who have become extremely bearish on the steel industry and the suppliers that provide raw materials for steel production. With Cliffs facing not only falling iron ore prices but also higher costs at its mine properties, the company doesn’t have any obvious catalysts that would help its shares hit bottom.

Finally, Juniper Networks fell 5%. Again, Goldman was the catalyst, downgrading the stock and citing intense competition not just from industry leader Cisco Systems but from smaller players as well. With new technology coming out, Juniper has to demonstrate its ability to keep up if it wants to stay competitive in the space, especially given the unpredictable capital-spending patterns among its key telecom customers.

Caterpillar has done a great job of dominating its market, but even with its advantages, the company still has to address how to deal with a troublesome global economy. Read all about how Caterpillar plans to execute a winning strategy by reading The Motley Fool’s brand new report, which includes discussion of the company’s strengths and weaknesses. Just …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Here's What This 220% Gainer Has Been Buying and Selling

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By Selena Maranjian, The Motley Fool

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Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at Passport Capital, which was founded by John Burbank in 2000 and known for combining macroeconomic analysis and fundamental research. Burbank himself is famous for having called the subprime mortgage crisis and reportedly earned a 220% return on it in 2007, though he lost 50% the following year.

The company’s reportable stock portfolio totaled $2.6 billion in value as of Dec. 31, 2012.

Interesting developments
So what does Passport Capital‘s latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Williams and calls on Schlumberger. Other new holdings of interest include Amarin and Exelixis . Amarin is a late-stage cardiovascular-focused biotech company with a promising (and FDA-approved) drug to lower triglycerides, Vascepa. It also has strong support on Wall Street, despite a significant number of shares sold short. My colleague Brian Orelli has wondered why bigger companies haven’t signed on as partners with Amarin. Some wonder whether the company will be acquired by a big pharmaceutical company.

Exelixis, meanwhile, has received FDA approval for its thyroid cancer drug, Cometriq, and has just launched it. That drug may also get approved to treat prostate cancer, and Exelixis is looking at treating more kinds of cancers with it, which could drive more profits. While the company’s future seems promising, its present has led theStreet to downgrade it because of “feeble” EPS growth and lackluster return on equity and operating cash flow.

Among holdings in which Passport Capital increased its stake was Cliffs Natural Resources , an iron and coal specialist that recently slashed its dividend by 76%, while announcing the issuance of 9 million new shares (6% of its current share count). Those moves might boost its long-term health, but they’re not thrilling some shareholders, who see greatly reduced income and share dilution. With its stock down roughly 60% over the past year, though, some wonder whether it’s a good buy now. Cliffs recently announced plans to idle a Quebec iron ore pellet plant, and management is bullish, expecting growth in demand from China and overall pricing improvements.

Passport Capital reduced its stake in lots of companies, including Riverbed Technology, which has been hurt by sluggish IT spending. Many have lost faith in the company, with its shares down 46% over the past year, but its disappointing fourth-quarter results weren’t that bad, with double-digit revenue growth and some strength in its recently acquired OPTNET business. The company does face serious competition, though.

Finally, Passport Capital‘s biggest closed positions included Wynn Resorts and Apple. Other closed positions of interest include Keryx Biopharmaceuticals and Vical .

Keryx investors were hit with disappointing trial results a year or so ago for the company’s experimental colorectal cancer drug perifosine. But in January they …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Here's What This $41 Billion Hedge Fund Company Has Been Buying

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By Selena Maranjian, The Motley Fool

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Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at the D. E. Shaw company, founded by David E. Shaw and with a reportable stock portfolio totaling $41 billion in value as of Dec. 31, 2012.

Shaw is known as a math wizard and a quantitative investing pioneer. His firm is reportedly extremely selective, hiring less than 1% of applicants — and Amazon.com CEO Jeff Bezos once made the cut.

Interesting developments
So what does D. E. Shaw’s latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Kraft Foods Group and ADT. Other new holdings of interest include Spectrum Pharmaceuticals . Spectrum has been experiencing strong growth due to the success of its colorectal cancer drug Fusilev, but that was partly due to a supply shortage faced by generic competitors. With that issue going away, Spectrum recently trimmed its growth expectations, sending the heavily shorted stock down sharply. Still, it has more than a dozen other drugs in development in its pipeline, and has broadened its scope with the recent purchase of Allos Therapeutics, which is expected to help cut costs and also includes the lymphoma drug Folotyn. Spectrum also recently secured rights for the bladder-cancer drug apaziquone.

Among holdings in which D. E. Shaw increased its stake was Acadia Pharmaceuticals , which has tripled in value over the past year, on high hopes for its pimavanserin drug, which treats psychosis in patients with Parkinson’s disease and is nearing the phase 3 trial finish line. If the drug gains FDA approval, it will enjoy little competition and could be a big winner for Acadia. The company thinks the drug also might be effective against psychosis related to Alzheimer’s Disease and is conducting trials for that as well.

D. E. Shaw reduced its stake in lots of companies, including Mesabi Trust and Molycorp . With a recent hefty dividend yield of 8.2%, Mesabi Trust is a royalty trust collecting a cut of the proceeds from iron mined by a Cliffs Natural Resources subsidiary — and then paying them out to shareholders. Unlike many companies with fixed payouts, Mesabi’s fluctuate over time, along with the fortunes of the mines, and while royalty trusts often have expiration dates, Mesabi’s expiration isn’t happening anytime soon. A possible downside for the stock is a slowdown in demand for ore, particularly in China, which has been one of several issues for Cliffs.

Molycorp has been struggling in a tough environment and recently worried investors with a surprisingly large share offering and debt issuance. (Some worry about further capital needs, too, and don’t like its negative free cash flow.) Still, for those who can accept considerable risk and volatility, there’s a lot of promise in Molycorp, in part due to its acquisition of Neo Materials …read more
Source: FULL ARTICLE at DailyFinance