Cliffs Natural Resources (NYSE:CLF) will release its quarterly report on Thursday, and investors have gotten used to bad news from the once-promising coal and iron ore producer. As levels of construction and infrastructure-building activity have plunged in formerly hot growth areas like emerging markets, the market for steel production has largely evaporated, and that has had a highly negative impact on Cliffs earnings.

The big question facing Cliffs investors, though, is whether the turn downward in the industry just represents a normal cyclical drop that will eventually give way to growth again. As the worst performer in the S&P 500 this year, the stock is priced to reflect virtually no chance of a recovery anytime soon, but if the company gets some help on the macroeconomic front, then share prices could finally begin to mend. Let's take an early look at what's been happening with Cliffs Natural Resources over the past quarter and what we're likely to see in its quarterly report.

Stats on Cliffs Natural Resources

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$1.42 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Cliffs earnings bounced back this quarter?
Despite the big drop in Cliffs earnings, analysts have actually gotten slightly less pessimistic about the company in recent months, boosting their June quarter estimates by almost a dime per share and raising their full-year 2013 views by about 25%. But they've also cut their 2014 estimates by almost a third, and the stock has failed to bounce back from its plunge earlier in the year, with shares up just 2% from its lowest levels in mid-April.

Cliffs actually came into the quarter with a bit of positive momentum, after the company managed to beat modest expectations in its first-quarter earnings report. As painful as a 6% drop in sales and falling net income that amounted to just barely a quarter of what the company earned the previous year might be, Cliffs still nearly doubled what analysts had expected to see. That sent the beaten-down shares up 17% in a single day, despite the fact that troubling trends in global iron ore sales and prices could continue to weigh on the company well into the future.

But the problem for Cliffs is that like many of its peers, its future remains tied to macroeconomic conditions in China and other high-growth areas of the world, and those areas haven't held up as well as the U.S. economy has. Other economically sensitive materials producers have seen similar trends, with U.S. Steel (NYSE:X) expected to go from a profit last year to a sizable loss this year. Moreover, even though aluminum giant Alcoa (NYSE:AA) has managed to hit bottom as far as its earnings are concerned, it nevertheless faces strong headwinds from both a lack of demand in China and substantial production activity from Chinese rivals in the aluminum industry. Investors have awarded all three stocks with low price-to-book ratios, but given the current malaise in the industry, it appears more likely that book values are artificially high than that share prices are true bargains.

Given the huge reversal of fortune for the stock, many believed that it was only a matter of time before heads began to roll, and earlier this month, CEO Joseph Carrabba announced that he would step down from his leadership role by the end of 2013. With lead director Frank McAllister having resigned in June and Global Operations President Laurie Brias having also left the company, the executive suite at Cliffs will look a lot different in the near future as the company tries to chart a stronger course forward.

Cliffs got a little bit of good news this month, when it was able to restart its Wabush Scully mine after forest fires in the region forced a week-long shutdown. Still, with other facilities having been idled or shuttered, the company isn't close to having restored its former capacity.

In the Cliffs earnings report, the primary focus should be on succession planning and how the company plans to go forward from here. With a vacuum in leadership, investors need to be careful that Cliffs doesn't make any mistakes it will come to regret.

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Fool contributor Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool. You can follow Dan on Twitter @DanCaplinger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.