Why Cliffs Natural Resources' Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of iron ore producer Cliffs Natural Resources (NYSE: CLF  ) fell 10% today after reporting earnings.

So what: Sales fell a whopping 30% to $1.45 billion and net income dropped 86% to $85.1 million, or $0.59 per share. Profits from continuing operations were $0.61, which was half of what analysts estimated.  

Now what: There's really nothing good to report here. The price of seaborne iron ore fell 36% in the quarter and outlook for the spot price of iron ore was reduced by 12%. Cliffs may look cheap, trading at four times trailing earnings, but these results are quickly headed in the wrong direction and investors could be headed for a trap. I'm staying away from this potential landmine and searching for more stable choices in the market today.

Interested in more info on Cliffs Natural Resources? Add it to your watchlist by clicking here.


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