As far as Cleveland-Cliffs is concerned, today is another Iron Age

Posted Feb 14th 2008 4:47PM by Joseph Lazzaro
Filed under: Industry, Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Cleveland-Cliffs is worth an evaluation.

Cleveland-Cliffs Inc. (NYSE: CLF) is the largest producer of iron ore pellets in North America, and is also a major supplier of metallurgical coal to the global steelmaking industry.

Analysts like CLF's solid fundamentals, pricing power, and high customer retention rate.

Analysts also like CLF's prospects for increased business: growth in China is driving pellet demand, with domestic iron ore accounting for only 45% of supply. Production capacity of competitors is increasing, but it's not fast enough to keep up with demand growth. The Reuters FY 2008/FY 2009 EPS consensus estimates for CLF are $5.12/$10.31.

The risks? Analysts are keeping an eye on CLF's Empire Mine, and the company's ability to de-bottleneck other facilities to compensate for depleting production at Empire, expected to be fully depleted in mid-2009

The First Call mean rating for CLF is: Buy [4 firms]. Mean 2008 target: $97 [high: $140, low: $48].

Stock Analysis: Cleveland-Cliffs is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from CLF's shares. Sell/Stop Loss if you were to purchase shares in this company: $68.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: Asia, China, Cleveland Cliffs, CLF, emerging markets, iron, iron ore, pellets, steel