Thursday, April 28, 2011

Cliffs Natural Resources (NYSE: CLF): Q1 Earnings Preview 2011

Cliffs Natural Resources (NYSE: CLF), the largest iron ore producer in North America, is scheduled to release its first-quarter earnings after the closing bell on Thursday, April 28, 2011. Analysts, on average, expect the company to report earnings of $2.25 per share on revenue of $1.40 billion. In the year ago period, the company reported earnings of 55 cents per share on revenue of $727.70 million.

Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal.

One of Cliffs’ biggest competitive advantage in the iron ore business is its long-standing relationships with some of the largest steel manufacturers in the world. Iron ore pellets produced by Cliffs are almost entirely used as raw material for the production of steel.

The price of iron ore, a key ingredient for steelmaking, has ralied in recent times due to tight Indian supplies and firm demand from top importer China. Cliffs has been following a strategy of geographical diversification while also diversifying its mineral portfolio. The recent acquisition of Consolidated would give Cliffs a foot in the door with Chinese buyers as it looks to boost its Asian business.

In the preceding fourth quarter, the Cleveland, Ohio-based company's net income was $384 million, or $2.82 a share, from $108.2 million, or 82 cents a share in the prior year quarter. Revenue jumped 74% to $1.42 billion from $820.5 million. Analysts, on average, expected the company to report earnings of $2.16 per share on revenue of $1.43 billion

At its last earnings call in January, , Cliffs raised its 2011 outlook for North American Iron Ore, with sales volume expected at about 28 million tons, with revenue of $140 to $145 per ton. Cliffs maintained its forecast for the company’s North American coal business with 2011 sales of about 6.5 million tons

Cliffs Natural Resources has seen growth in revenue from each ton of iron ore sold in North America. The revenue growth can be attributed to increased Chinese demand for iron ore and a continued rise of international sea freight that has pushed iron ore prices upwards. The increase in iron ore prices is also caused by rising global demand for steel sparked by economic growth.

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