UPDATE: Deutsche Bank Downgrades Cliffs Natural Resources to Hold, Lowers PT on Adjusted EPS

In a report published Wednesday, Deutsche Bank downgraded its rating on Cliffs Natural Resources

from Buy to Hold, and lowered its price target from $48.00 to $38.00. Deutsche Bank noted, “Cliffs 4Q12 adj. dil. EPS of $0.62 ahead of both DBe of $0.54 and FactSet consensus of $0.51, but EBITDA of $254m was lower than DBe of $308m (lower iron ore volumes and prices / higher costs). Headline EPS loss of $11.36 on previously announced non-cash charges. Downgrading to Hold (from Buy) and cutting our PT to $38 ($48) on estimated 19-21% dilution from unexpected share issuance (shares + mandatory convertible preferred) of 27-30m shares (including over-allotment), raising $885-940m (assuming $30-35 share price). Though BS position to improve, we question timing of issuance as 2013 cash flow generation likely to increase and after dividend cut by ~75% to $0.60 (from $2.50).” Cliffs Natural Resources closed on Tuesday at $36.61.