CLF Well Protected From Currency Headwinds
Brian Yu of Citi maintains his "buy" rating on Cliffs Natural Resources Inc (NASDAQ: CLF). The target price for CLF has been raised from $43 to $51.
According to Citi, spot iron ore prices in China indicate that there is a possibility of up to 40% hike in iron ore contract prices vs CIRA forecast of 15%. CLF's earnings are substantially leveraged to the seaborne settlement, with every 5% change resulting in roughly $0.30 per share rise in earnings, Citi mentions.
Citi said that Cliffs Natural Resources has US assets and is, therefore, well protected from currency headwinds relative to the majors in Australia and Brazil, which have suffered a setback from the appreciation of AUD and ARL since the May iron ore contract settlement. Citi expects CLF's balance sheet to improve by 4Q10.
