Is Cliffs Natural Resources a Sell After a Goldman Downgrade?

With shares of Cliffs Natural Resources Inc. (NYSE:CLF) trading around $30.70, is CLF a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s MovementMoney Cut in Half

Goldman Sachs slapped CLF with a downgrade on November 20, moving the stock from “Neutral” to “Sell” with a 6-month price target of $25 per share, a 29 percent downside from the closing price before the downgrade was announced, and an 18.5 percent downside from the stock price on November 26.

T = Technicals on the Stock Chart are Weak

As of November 25, the stock price is 12.94 percent below its 20-day simple moving average, or SMA; 19.43 percent below its 50-day SMA; and 36.67 percent below its 200-day SMA.

Since the beginning of 2012, the stock price has been in a steep downward trend, losing 53.38 percent of its value this year to date, and 48.59 percent year over year.

The stock is currently trading at the low end of a 52-week range between $29.80 and $78.85 per share with a relatively high beta of 2.45.

E = Earnings are not Increasing Quarter over Quarter

CLF’s revenue has been bumpy quarter to quarter. Revenue grew just 1.99 percent in the last quarter, after posting strong gains of 17.75 percent in the previous (second) quarter. However, revenue dropped 11.39 percent in the first quarter of 2012, and 24.91 percent in the fourth quarter of 2011.

Sept. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sept. 30, 2012
Revenue ($) in millions 1,896 1,424 1,262 1,486 1,515
Diluted EPS ($) 4.07 1.30 2.63 1.81 0.60

 

Earnings have been equally as volatile, only showing growth in one of the past four quarters. Earnings per share declined 67.03 percent in the most recent quarter, and 31.4 percent in the previous quarter…