Morgan Stanley Sees Much Lower Capex Outlook for Cliffs Natural Resources

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In a report published Tuesday, Morgan Stanley analyst Evan L. Kurtz reiterated an Underweight rating on
Cliffs Natural ResourcesCLF
. In the report, Morgan Stanley noted, “4Q14 results were below MSe but above consensus. Guidance for 2015 is consistent with our estimates, but management expects capex to be well below our forecast ($125-$150m vs. MSe of $250m). Using our 2015 iron ore price forecast of $79/t, the company's guidance implies EBITDA of ~$595m vs. MSe of $577m. However, our 2015 price forecast is above the current price of $61/t. At spot, we estimate that guidance implies 2015 EBITDA of ~$300m, below both MSe and consensus. Our thesis remains unchanged as we view the structural challenges facing the company as longer term and expect iron ore prices to remain weak. We expect the Canadian operations to be deconsolidated starting with 1Q15 due to the subsidiary bankruptcy filing.” Cliffs Natural Resources closed on Monday at $6.97.
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Posted In: Analyst ColorReiterationAnalyst RatingsEvan L. KurtzMorgan Stanley
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