How The Outcome Of The U.S. Presidential Election Could Impact Cliffs Natural Resources
The outcome of last week’s presidential election has provided a boost to the stock prices of domestic steel producers and iron ore mining companies. For example, Cliffs’ stock price has rallied nearly 22% since election day. [1] President-elect Trump has been outspoken in his intention to take a tough stance on the issue of the dumping of steel into the U.S., which has adversely impacted the prospects of the domestic steel industry. [2] Moreover, the President-elect has promised to spend big on infrastructure projects, which could significantly boost the demand for steel and consequently, iron ore (which is used in the production of steel). [2] Whereas we are looking for more details on the President-elect’s policies before changing our forecasts for Cliffs Natural Resources, in this article we will look at how his policies could boost the company’s stock price.
If President-elect Trump does deliver what he promises, the domestic steel industry is likely to get a double boost — greater protection from unfairly-traded steel, as well as greater demand for steel as a result of an increase in infrastructure spending. In this case, the demand for iron ore is likely to mirror the demand for steel. Check out our current shipment forecasts for Cliffs’ North American Iron Ore division, which accounts for over three-fourths of the company’s revenue and most of the company’s valuation.
In order to model the impact of President-elect Trump’s policies on Cliffs’ stock, we have created a scenario in which Cliffs’ North American iron ore shipments rise 10% to 23.4 million tons by the end of our forecast period. We have also suitably revised our margin forecasts for the division by around 300 basis points by the end of our forecast period.
See our forecast for Cliffs’ North American Iron Ore shipments in this scenario
As a result of the modified assumptions in our model, our price estimate for Cliffs increases by around 50%. Thus, if President-elect Trump does live up to his promises, it could significantly improve Cliffs business prospects and stock price.
See our complete analysis for the Impact Of President-elect Trump’s Policies scenario here
Have more questions about Cliffs Natural Resources? See the links below.
- What Is Cliffs Natural Resources’ Fundamental Value Based On 2015 Results?
- What Is Cliffs Natural Resources’ Revenue And EBITDA Breakdown?
- How Has Cliffs Natural Resources’ Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Cliffs Natural Resources’ Revenue & EBITDA Decline Over The Last 5 Years?
- By What Percentage Can Cliffs Natural Resources’ Revenue & EBITDA Change Over The Next 3 Years?
- How Will Cliffs Natural Resources’ Revenue Composition Change by 2020?
- How Do Cliffs Natural Resources’ Margins Compare With Those Of Iron Ore Mining Giants Such As Rio Tinto And Vale?
- Why ArcelorMittal Is The Most Important Customer For Cliffs’ U.S. Iron Ore Sales
- What’s New With Cleveland-Cliffs Stock?
- What’s Happening With Cleveland-Cliffs Stock?
- Why We Are Raising Our Price Estimate For Cleveland-Cliffs Despite A Weak Q4
- With Contracted Prices For 2023 Up, Is Cleveland-Cliffs Stock A Buy?
- Company Of The Day: Cleveland-Cliffs
- What To Expect From Cleveland-Cliffs Q3 Results?
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Notes:- Cliffs Natural Resources Stock Price, Google Finance [↩]
- US steel producers join Trump rally, Financial Times [↩] [↩]