Yesterday the Dow Jones Industrial Average (^DJI 0.47%) edged up 0.09% to 15,556 points, inching back toward Tuesday's all-time high. The S&P 500 managed almost three times the gain, pushing the index closer to the Dow's year-to-date leading position.
Cliffs Natural Resources (CLF 4.86%) shares have shot up 6% in premarket trading on news of the mining company's second-quarter earnings. Cliffs beat revenue estimates of $1.41 billion by $80 million, and adjusted EPS clocked in at $0.82, 34% above analyst estimates.
Wall Street wasn't aiming high with this corporation. Sales are down a seasonally adjusted 8.5%, while adjusted EPS plummeted 50% as mining companies continually find themselves between a rock and a hard place. But considering Cliff's newest report and Peabody Energy's (BTU) earnings win earlier this week, it seems that mining companies aren't out of steam yet. Yesterday's report coincided with a new International Energy Outlook report predicting a 56% uptick in global energy use over the next three decades. Mining companies' share prices have trailed the Dow over the past 12 months, with Peabody down 37% and Cliffs lagging a whopping 78%.
Mr. Market may have overreacted, especially considering the international outlook in store for global companies like Cliffs and Peabody. Non-OECD countries are expected to increase energy consumption by 90% by 2040, with China alone doubling the U.S.' energy use in 2040.
Source: EIA.gov.
Getting back to the Dow, Caterpillar (CAT 0.98%) was among the index's worst performers yesterday. Shares dropped 1.56% as the company continued to reel from a sales and earnings miss earlier this week. Caterpillar openly admitted that its short-term growth is nothing to love (2% this year), but if other better-than-expected natural-resources reports are any evidence, this latest sell-off may simply be the result of over-optimists (read: "China alpha bulls") finally opting out. For mining companies and Caterpillar alike, investors will need to keep a close watch on commodities prices in the coming months, as well as global growth in key expansion areas like China.
Health or wealth -- why not both?
Cliffs Natural Resources and Caterpillar shares could continue their adjustments today, but investors will also need to keep an eye on Ventas' (VTR -0.97%) 10 a.m. EDT earnings report. The health care REIT's shares have moved from 5% gains to a 12% drop over the last three months, and year-to-date gains clock in at 6.8% so far.
Despite lackluster stock-price performance, analysts are expecting an 8% sales boost, accompanied by a $0.07 increase in adjusted EPS to $1.02. With a 3.7% dividend and special REIT tax status, Ventas' recent stock performance may be a simple overvaluation correction as investors scramble for safer options in a global economic slump. The company still enjoys 96% ownership by institutional investors, and it has steadily increased its assets (and dividend) over the past decade, making it a potential match for long-term investors.
