24/7 Wall St. » CLF

Top Analyst Upgrades & Downgrades (ALL, T, BBY, CELG, CLF, EQY, HIG, JCP, JNPR, KIM, PGR, SD, SYNA, UA, VPRT, ZOLL)

Administrator — Fri, 27 Jan 2012 13:27:24 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street brokerage and research firms this Friday morning.

The Allstate Corporation (NYSE: ALL) Started as Outperform at William Blair.
AT&T Inc. (NYSE: T) Reinstated as Neutral with $30 price target at Credit Suisse.
Best Buy Co., Inc. (NYSE: BBY) Started as Outperform with $32 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Cut to Hold on Valuation at Argus.
Cliffs Natural Resources (NYSE: CLF) Cut to Neutral at Credit Suisse.
Equity One Inc. (NYSE: EQY) Cut to Sell at Citigroup.
Hartford Financial Services Group (NYSE: HIG) Cut to Neutral at JPMorgan.
J.C. Penney Company, Inc. (NYSE: JCP) Raised to Overweight at Piper Jaffray; Maintained as Buy but raised price target to $49 at Argus.
Juniper Networks Inc. (NYSE: JNPR) Cut to Market Perform at Morgan Keegan.
Kimco Realty Corporation (NYSE: KIM) Cut to Neutral at Citigroup.
The Progressive Corporation (NYSE: PGR) Started as Underperform at William Blair.
Sandridge Energy Inc. (NYSE: SD) Started as Buy at Citigroup.
Synaptics Inc. (NASDAQ: SYNA) Raised to Buy at Needham; Cut to Neutral at Stern Agee.
Under Armour, Inc. (NYSE: UA) Reiterated as Buy with $102 price target at Canaccord Genuity.
Vistaprint NV (NASDAQ: VPRT) Cut to Underperform as Bear of the Day at Zacks.
ZOLL Medical Corporation (NASDAQ: ZOLL) maintained Outperform as Bull of the Day at Zacks.

If you enjoyed the top analyst calls, you can sign up in the box below to join our morning email list to receive news directly in your inbox each morning. We include major analyst upgrades and downgrades, IPO and M&A news, special situation developments, observations on Warren Buffett and key market gurus, as well as special exclusive feature stories.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Analyst Calls Tagged: ALL, BBY, CELG, CLF, EQY, HIG, JCP, JNPR, KIM, PGR, SD, SYNA, T, UA, VPRT, ZOLL

24/7 Wall St. Closing Bell (LULU, CLF, DPZ, WNR, SINA, GES, BIG, ZUMZ, RY, BNS, YRCWD, WDC, RIMM, THC, JASO)

Paul Ausick — Fri, 02 Dec 2011 21:12:02 +0000

Stocks got off to a good start this morning following the Labor Department’s report on non-farm payrolls, up slightly less than expected at 120,000 new jobs, and an unexpected drop in US unemployment from 9% to 8.6%. Also supporting prices this morning was news that the European Central Bank would lend 100-200 million euros to the IMF to hand out to debtor nations in the Eurozone. Gains peaked in the early morning and have remained up only modestly since about noon. The dollar strengthened against both the euro and the yen, keeping gains for both crude oil and gold at under 1%. Crude oil is trading at $100.83/barrel and gold is trading at $1,747.10/ounce just before today’s close.

The unofficial closing bells put the DJIA down less than 1 point to 12,019.42 (-0.01%), the NASDAQ rose less than 1 point (0.03%) to 2,626.93, and the S&P 500 fell 0.02% or less than 1 point to 1,244.28. Folks, that’s flat!

There were several analyst upgrades and downgrades today, including Lululemon Athletica Inc. (NASDAQ: LULU) raised to ‘buy’ at KeyBanc. Other ratings action Cliffs Natural Resources Inc. (NYSE: CLF) raised to ‘outperform’ at Credit Suisse; Domino’s Pizza Inc. (NYSE: DPZ) started as ‘hold’ at KeyBanc; Western Refining Inc. (NYSE: WNR) raised to ‘outperform’ at Credit Suisse; Sina Corp. (NASDAQ: SINA) raised to ‘buy’ at Deutsche Bank; and Guess? Inc. (NYSE: GES) cut to ‘neutral’ at Citigroup.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading:
Big Lots, Inc. (NYSE: BIG) is down -8.6%% at $36.34; Zumiez Inc. (NASDAQ: ZUMZ) is up 23.9% at $28.95; Royal Bank of Canada (NYSE: RY) is up 3.4% at $47.82; and Bank of Nova Scotia (NYSE: BNS) is down -3.1% at $48.08.

Several other standouts from today are as follows…

YRC Worldwide Inc. (NASDAQ: YRCWD) is up 29.7% at $12.61. The freight hauler concluded a 1-for-300 reverse split that drove the share price to $9 from $0.03.

Western Digital Corp. (NYSE: WDC) is up about 7% at $31.30. The computer disk drive maker announced that it was resuming operations at one of its flooded Thai plants and raised its revenue estimate for the current quarter. More details here.

Research in Motion Ltd. (NASDAQ: RIMM) is down about -9.6% at $16.79. The smartphone and tablet maker announced an inventory writedown of $485 million for unsold PlayBook tablets and said that full-year earnings would be lower. Detailed coverage here.

Tenet Healthcare Corp. (NYSE: THC) is down more than -10% at $4.20. The health care facilities operator likely is suffering from a lowered target price from BMO Capital Markets with rating of ‘market perform’.

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) is down nearly -7% at $1.74. The solar PV maker is likely giving back gains made over the past two days. The was little reason for the gain in the first place, so that investors are taking it back should be no surprise.

Stay tuned for Monday. We have noted a speech due from Chicago Federal Reserve President Charles Evans and short-term Treasury bill auctions in the morning. Here are other noteworthy events scheduled for Monday (all times Eastern):

10:00 a.m. – Census Bureau factory orders report
10:00 a.m. – Industrial Supply Management non-manufacturing index

Have a great weekend.

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: BIG, BNS, CLF, DPZ, GES, JASO, LULU, RIMM, RY, SINA, THC, WDC, WNR, YRCWD, ZUMZ

Top Analyst Upgrades & Downgrades (ACI, AMT, BRK-B, CLF, CCI, DE, DPZ, GES, LOW, LULU, SINA, SNN, WNR, WAG, SLF, WPI, TEVA)

Administrator — Fri, 02 Dec 2011 13:19:44 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Friday morning.

Arch Coal, Inc. (NYSE: ACI) named as Bear of the Day with a $13.00 price target at Zacks.
American Tower Corporation (NYSE: AMT) Started as Outperform at Macquarie.
Berkshire Hathaway Inc. (NYSE: BRK.B) named as Bull of the Day with a $91.00 price target at Zacks.
Cliffs Natural Resources Inc. (NYSE: CLF) Raised to Outperform at Credit Suisse.
Crown Castle International Corporation (NYSE: CCI) Started as Outperform at Macquarie.
Deere & Company (NYSE: DE) named as value stock of the day at Zacks.
Domino’s Pizza, Inc. (NYSE: DPZ) Started as Hold at KeyBanc.
Guess? Inc. (NYSE: GES) Cut to Neutral at Citigroup.
Lowe’s Companies Inc. (NYSE: LOW) Raised to Buy at Goldman Sachs.
Lululemon Athletica Inc. (NASDAQ: LULU) Raised to Buy at KeyBanc.
Sina Corporation (NASDAQ: SINA) Raised to Buy at Deutsche Bank
Smith & Nephew plc (NYSE: SNN) Raised to Overweight at Morgan Stanley.
Western Refining Inc. (NYSE: WNR) Raised to Outperform at Credit Suisse.

Argus made changes to its institutional model portfolio: added shares of Walgreen Co. (NYSE: WAG) and sold out of shares of Sun Life Financial Inc. (NYSE: SLF).

Credit Suisse is out positive on generics saying that the news flow on generic Lipitor has obscured the bigger picture on Watson Pharmaceuticals, Inc. (NYSE: WPI) and Teva Pharmaceutical Industries Limited (NASDAQ: TEVA). The firm recommends buying WPI after its recent weakness as strong fundamentals just got cheaper. It also recommends buying TEVA for the longer term and as a turnaround story for 2012.

JON C. OGG

Filed under: Analyst Calls Tagged: ACI, AMT, BRK-B, CCI, CLF, DE, DPZ, GES, LOW, LULU, SINA, SLF, SNN, TEVA, WAG, WNR, WPI

Coal Miners Win a Meaningless Battle over Mountaintop Removal Mining (ACI, ANR, BTU, CLF, CNX, PCX, KOL)

Administrator — Fri, 07 Oct 2011 16:17:20 +0000

Coal company stock prices hit a five-year high in the summer of 2008, just before the Lehman Brothers bankruptcy sent the entire global economy into a tailspin. Five-year lows hit most companies before the end of that year and they have been making a steady, if slow, comeback since then, posting 52-week highs in the first half of this year on expectations of a global economic recovery. Stock prices have turned down again, though, as the outlook for economic recovery continues to dim.

In addition to its struggles with a weak economy, the coal industry is almost continuously fighting rear-guard battles against environmentalists and regulators. The industry, or at least some of its players, have earned the scrutiny following deadly mine explosions and for continuing the widely denounced mining practice known as mountaintop removal. The US Environmental Protection Agency tried to rein in mountaintop removal mining by invoking provisions in the Clean Water Act. In a court ruling yesterday, the industry won a victory over the EPA when the judge ruled that the agency had exceeded its enforcement authority by failing to go through the formal rulemaking process before promulgating the restrictions on mountaintop removal.

The suit was filed by the National Mining Association, an mining industry group that includes large coal miners like Arch Coal Inc. (NYSE: ACI), Alpha Natural Resources Inc. (NYSE: ANR), Peabody Energy Corp. (NYSE: BTU), Cliffs Natural Resources Inc. (NYSE: CLF), Consol Energy Inc. (NYSE: CNX), and Patriot Coal Corp. (NYSE: PCX). The court ruling is expected to remove restrictions on more than 70 mining permits that were holding up projects in Appalachia.

The EPA pointed out that the ruling is a procedural issue and that it does not affect the agency’s authority under the Clean Water Act. In fact, the EPA released in July its final guidance which replaced the interim guidance that the court ruled on yesterday.

This issue still has some time to go before it is finally played out, and coal miners will continue to struggle, but not because they can’t keep knocking the tops off Appalachian mountains. On Monday, Arch Coal revised its outlook for the 2011 fiscal year from EPS of $1.75-$2.15 to $1.00-$1.40. The company has lost production of metallurgical coal at one of its mines following a roof collapse. Several other miners have had similar problems producing the high-priced coal and that is sending mining companies back to Appalachian mines.

Typically, when production of coal is disrupted, the price of coal rises. That’s not happening this time as Australian shipments of coal are fast making up for the disruption to production following last year’s floods. And then there’s the overall weak economy, which cuts demand for energy even more.

Over the past year, all seven of the companies mentioned here have seen share prices drop from around -5% (Consol) to nearly -60% (Alpha). Whether the coal mining stocks are currently a great value or a looming value trap depends more the pace of recovery in the world’s economy than on winning a pyrrhic victory over the EPA. And today’s share price declines bear that out.

Shares of Arch Coal are down more than -2% at around noon today, at $15.44, in a 52-week range of $13.09-$36.99. Alpha’s shares are off -3.5%, at $18.49, in a 52-week range of $15.49-$68.05. Patriot shares are off more than -7.5%, at $9.28, in a 52-week range of $6.92-$29.20. The Market Vectors Coal ETF (NYSE: KOL) is up 0.3%, at $32.03, in a 52-week range of $27.42-$51.87.

Paul Ausick

Filed under: Commodities Tagged: ACI, ANR, BTU, CLF, CNX, KOL, PCX

August’s New Massive Stock Buybacks… Over $30 Billion (LOW, CVS, CELG, COV, INTU, DISCA, HRS, LMT, RSG, LOW, ABC, MXIM, ANR, AVT, JAH, LUV, STJ, ECL, IPG, FRX, ACE, CLF, CTSH, KBR, NWL, VRX, AKAM, AOL, DLB, URBN, ACM, CHTR, MYGN, PFG, HSIC)

Administrator — Wed, 31 Aug 2011 19:00:52 +0000

The pace of stock buyback announcements in the month of August was almost unbelievable. The pace was stronger at the start of the month when earnings were still coming in droves, but the number of newly announced buyback plans and the extended or expanded buyback plans remained high throughout the entire month. Many companies announce share buybacks and never spend much on the actual plan. Today, these companies are by and large actually living up to their promises. These are The August Buyback Kings….

We would normally group these alphabetically, but not today. We grouped these in order of size and then we used an alphabetic order when it came to the same size of a buyback announcement. The first group is the billions of dollars.

We then grouped the stocks by size again from the under $1 billion down to $500 million, and then we grouped the buybacks of under $500 million down to $200 million. Usually we would cut the list off at buybacks of the $100 million and higher but the list was already too big so we cut the Buyback Kings off at $200 million for August. Lastly, we have a chart at the very end tallying it all up…. Some $28.7 billion for just the $200 million and higher in new or expanded buyback announcements. There were literally dozens of other buybacks that were closer to the $100 million mark and many more that were less than that.

The $1 billion and higher alone which were announced in August were as follows: Lowe’s Companies, Inc. (NYSE: LOW); CVS Caremark Corporation (NYSE: CVS); Celgene Corporation (NASDAQ: CELG); Covidien plc (NYSE: COV); Intuit Inc. (NASDAQ: INTU); Discovery Communications, Inc. (NASDAQ: DISCA); Harris Corporation (NYSE: HRS); and Lockheed Martin Corporation (NYSE: LMT).

Filed under: Dividend, Shareholder Issues, Stock Buybacks Tagged: ABC, ACE, ACM, AKAM, ANR, AOL, AVT, CELG, CHTR, CLF, COV, CSCO, CTSH, CVS, CVX, DISCA, DLB, ECL, FRX, HRS, INTU, IPG, JAH, KBR, LMT, LOW, LUV, MXIM, MYGN, NWL, NWSA, PFG, RSG, STJ, URBN, VRX, XOM

Share Buyback Announcements Continue In Droves (PFG, BIN, CLF, LTM, ACM, FRX, IPG, MYGN, RSG, LO, NWL, TIVO)

Administrator — Wed, 17 Aug 2011 17:18:32 +0000

It was just last week that we had identified literally 25 big share buyback announcements from companies in the preceding two weeks. These companies were actually buying back the stock as well rather than the historic buybacks that are not required to spend a penny. It turns out that the trend for August remains. Many new buyback announcements have been announced and it seems like companies are unlocking cash to repurchase their shares in droves.

Some of the larger and more impacting buyback announcements have been made by the following companies: Principal Financial Group Inc. (NYSE: PFG); Progressive Waste Solutions Ltd. (NYSE: BIN); Cliffs Natural Resources Inc. (NYSE: CLF); Life Time Fitness Inc. (NYSE: LTM); AECOM Technology Corp. (NYSE: ACM); Forest Laboratories Inc. (NYSE: FRX); Interpublic Group of Companies, Inc. (NYSE: IPG); Myriad Genetics Inc. (NASDAQ: MYGN); Republic Services, Inc. (NYSE: RSG); Lorillard, Inc. (NYSE: LO); Newell Rubbermaid Inc. (NYSE: NWL); and TiVo Inc. (NASDAQ: TIVO).

By now you already know that the attitude of 24/7 Wall St. is that dividends offer better long-term value than buybacks. We have shown what the dividend yield is for each here, or we have shown that there is no dividend.

Principal Financial Group Inc. (NYSE: PFG) announced that its board of directors has authorized a share buyback plan for up to $200 million in common stock. This represents about 8.5 million shares at current prices when average daily volume is 2.7 million shares. Its market cap is about $7.4 billion. The dividend yield is roughly 2.3% as of today.

Progressive Waste Solutions Ltd. (NYSE: BIN), also referred to as BFI Canada, announced a buyback of up to 4 million shares of common stock. That is about $80 million at today’s price. The market cap is $2.5 billion and the average daily volume is about 428,000 shares. The dividend yield is listed as being about 2.5%.

Cliffs Natural Resources Inc. (NYSE: CLF) has announced the authorization to buy back up to 4 million shares, close to $300 million in total per today’s dollars. The market cap is nearly $11 billion and the average volume is 3.7 million shares. The company’s dividend yield is only 1.5%.

Filed under: Corporate Governance, Dividend, Shareholder Issues, Stock Buybacks Tagged: ACM, BIN, CLF, FRX, IPG, LO, LTM, MYGN, NWL, PFG, RSG, TIVO

Despite Woes, New Buybacks & Dividend Hikes Stay Strong (AOS, CLF, CMI, KLAC, NWS)

Administrator — Tue, 12 Jul 2011 13:58:54 +0000

The market is soft, the economy hit a soft patch, and now woes are building about Italy beyond Greece, while China and India keep applying the brakes on growth. This is taking the wind out of many top stocks, but some companies are trying to show the all-clear signal that things are not as bad in all aspects of business. We are getting more and more dividend hikes and even share buyback announcements from companies. The trends continue…

Today’s key dividend hikes and share buybacks are in shares of The A. O. Smith Corporation (NYSE: AOS), Cliffs Natural Resources Inc. (NYSE: CLF), Cummins Inc. (NYSE: CMI), KLA-Tencor Corporation (NASDAQ: KLAC), and News Corporation (NASDAQ: NWS). We have added in price data and compared yields and the relative size to share prices if applicable.

The A. O. Smith Corporation (NYSE: AOS) approved a 14% dividend hike in its quarterly cash dividend to $0.16 per quarter per share and payable on August 15 to shareholders of record July 29. The new yield is roughly 1.5% with shares currently down 1 cent at $41.87. Here is what is amazing, housing may stink but it appears that the replacement cycle is coming soon… A.O. Smith manufactures and sells water heating equipment to the residential and commercial markets.

Cliffs Natural Resources Inc. (NYSE: CLF) just announced last night that it will increase the quarterly cash dividend by 100% to $0.28 per share per quarter, payable on September 1 to shareholders of record as of the close on August 15. Doubling a dividend is usually a solid message. Still, this is a lower dividend yield of just under 1.2% now that shares are up marginally at $95.00 this morning. The iron ore and metallurgical coal player’s 52-week trading range is $45.18 to $102.48.

Cummins Inc. (NYSE: CMI) is trying to signal that the engine business is fine for years ahead because this is one large dividend hike. Cummins hiked its quarterly dividend by about 50% to $0.40 per quarter per share from a rate of $0.2625 per quarter per share. The new rate is not a major yield but it is larger than most tied to auto or trucks as its new yield is above 1.5%. Shares are up 2% at $106.00 this morning and the 52-week range is $58.91 to $121.49.

KLA-Tencor Corporation (NASDAQ: KLAC) has authorized an increase in the quarterly dividend from $0.25 to $0.35 per share, taking effect in with the quarterly dividend to be declared in August 2011. This is nearly a 40% hike and represents its third dividend increase since initiating its dividend in April 2005. With shares down 2% around $41.30, KLA-Tencor’s new dividend will clock in at close to 3.4%. That is impressive for a technology stock.

News Corporation (NASDAQ: NWS) has decided that the recent share weakness around its ‘News of the World’ and around its BSkyB buyout reached the “enough is enough” point. Today Rupert Murdoch and friends announced that a stock repurchase program totaling $5 billion. The new plan increases what was approximately $1.8 billion remaining under the prior buyback plan. What is different about this buyback from the prior buyback is that the company said it intends to buy back “$5 billion of Class A common stock and Class B common stock from time to time over the next 12 months.” We are talking about a $43 billion market cap and a company that has billions in cash on hand. Shares are up 2% at $16.44 and the 52-week range is $13.46 to $19.08. This was at $18.50 just on July 5.

Higher dividends and higher buybacks might not make shares rise if the market remains soft and nervous, but the dividend hiking trend remains the top reward for returning capital to shareholders.

JON C. OGG

Filed under: Compensation, Corporate Governance, Dividend, Economy, Shareholder Issues, Stock Buybacks Tagged: AOS, CLF, CMI, KLAC, NWS

Top Analyst Upgrades & Downgrades (ACTV, AUO, BBBB, CNK, CLWR, CLF, DFS, EK, FSL, GIS, MAS, RGC, SNDK, SBUX, UA, WCG, YNDX)

Administrator — Tue, 05 Jul 2011 12:01:10 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday morning.

The Active Network, Inc. (NYSE: ACTV) Started as Buy at BofA/ML; Started as Buy at Citigroup.
AU Optronics Corp. (NYSE: AUO) Cut to Neutral at Goldman Sachs.
Blackboard Inc. (NASDAQ: BBBB) dropped from Underperform at BofA/ML; Cut to Neutral at JPMorgan.
Cinemark Holdings Inc. (NYSE: CNK) Cut to Neutral at Janney.
Clearwire Corporation (NASDAQ: CLWR) Raised to Outperform with $6 target at Credit Suisse.
Cliffs Natural Resources (NYSE: CLF) Reinstated Buy with $118 target at BofA/ML.
Discover Financial Services (NYSE: DFS) named as Bull of the Day at Zacks.
Eastman Kodak Co. (NYSE: EK) Reiterated Hold at Argus.
Freescale Semiconductor Inc. (NYSE: FSL) Started as Buy at Citigroup; Started as Outperform at Credit Suisse.
General Mills, Inc. (NYSE: GIS) Cut to Neutral at Credit Suisse.
Masco Corporation (NYSE: MAS) Maintained Underperform as Bear of the Day at Zacks.
Regal Entertainment Group (NYSE: RGC) Cut to Sell at Janney Capital.
SanDisk Corporation (NASDAQ: SNDK) Raised to Buy at Deutsche Bank.
Starbucks Corporation (NASDAQ: SBUX) Reiterated Buy but raised target to $45 at Argus.
Under Armour, Inc. (NYSE: UA) Called out as “Overvalued” in the weekend Barron’s.
WellCare Health Plans, Inc. (NYSE: WCG) called top Value at Zacks.
Yandex N. V. (NASDAQ: YNDX) Started as Overweight at Morgan Stanley; Started as Neutral at Goldman Sachs.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: ACTV, AUO, BBBB, CLF, CLWR, CNK, DFS, EK, FSL, GIS, MAS, RGC, SBUX, SNDK, UA, WCG, YNDX

Cliffs Stock Ignores Pending Secondary Offering Entirely (CLF)

Administrator — Tue, 07 Jun 2011 19:12:03 +0000

How many companies can announce that they are raising cash and see shares rise or even remain flat going into the pricing of the offering? Not many, but don’t tell that to Cliffs Natural Resources Inc. (NYSE: CLF). The company is likely to price some 9,000,000 shares of common stock tonight or tomorrow in a secondary stock offering.

Usually stocks tend to sell off into secondary offerings. Shares were up 0.1% at $86.94 earlier today and the shares were down only 0.1% at $86.75 with an hour until the close. If the deal priced right here now, that 9 million shares would translate to gross proceeds of about $782 million. If the full over-allotment option to purchase an additional 1,350,000 common shares gets exercised at-market today, the tally would be a hair shy of $900 million.

The shares are being sold by the company and the proceeds were listed as being “to pay repay borrowings under the company’s previously announced bridge credit facility.” It turns out that this credit facility was tapped to help pay for its recent acquisition of Consolidated Thompson Iron Mines Limited.

If any proceeds are remaining, the funds are earmarked for the “general corporate purposes” use. The underwriting group’s book-runners are J.P. Morgan Securities, BofA Merrill Lynch, and Citigroup Global.

Iron ore pellets, lump and fines iron ore, and metallurgical coal products must be holding up just fine. Cliffs did previously close its acquisition of Consolidated Thompson back on May 12, 2011. The company forecast that its production ramp-up at Bloom Lake Mine is progressing as planned and the operation is anticipated to reach an 8 million ton annualized production rate by the end of 2011.

With shares at $86.75, the 52-week trading range is $44.20 to $102.48 and the market cap is $11.7 billion. Maybe the consensus price target of about $124.00 per share is why shares have not sold off on the secondary offering.

Some stocks fall by a higher percentage than the actual implied dilution of an offering. Some stocks fall a fraction of the implied dilution. Then there is Cliffs where the offering seems to have already been factored in.

The full preliminary prospectus is here.

JON C. OGG

Filed under: Commodities, Metals, Secondary Offering Tagged: CLF

Commodities Watch: Mega-deals Ahead in Metals; Copper Miner Can’t Sell Itself; Grain Prices Rising as Stockpiles Fall (CLF, LUNCF, ABX, IEMMF, MOO, DBA)

Administrator — Thu, 26 May 2011 18:00:56 +0000

Today’s commodities news leads off with a new report on mergers and acquisitions in the metals sector, including a failed try at selling a copper miner. There’s also a new report on grain production and pricing for the coming year.

Auditing and consulting firm Pricewaterhouse Coopers (PwC) has released a new report on global M&A activity in the metals industry. The report notes that two of the four mega-deals ($1 billion or more) in the first quarter of 2011 came from private equity firms, not from competitors seeking a strategic gain.

Almost 40% of acquisition targets in the first quarter were iron ore producers. The biggest deal was the acquisition of Canada’s Consolidated Thompson by Cliffs Natural Resources Inc. (NYSE: CLF) in a deal worth nearly $5 billion. The deal gives Cliffs more exposure in China through Thompson’s sales of iron ore to Wuhan Steel.

PwC said metals deals in the first quarter totaled 26, identical with fourth quarter 2010 totals. The total value of the deals fell sequentially from $14 billion to $12.9 billion, and the value of an average deal was flat at $500 million. Year-over-year, first quarter deals rose from 24 last year to 26, and the dollar value more than doubled.

Part of the reason for the growth in acquisitions is that metals firms have raised their average cash on hand to $2 billion, which combined with low interest rates gives the companies additional buying power. PwC expects financial investors like private equity firms to continue buying the sector, but says these investors are more likely to seek downstream investments, leaving the mines to other metals companies.

Copper and zinc miner Lundin Mining Corp. (OTC: LUNCF) put itself on the auction block in March in an effort to combat a hostile takeover offer of $4.4 billion from Equinox Minerals Ltd. Lundin’s CEO thought the offer was too low, but was unable to gin up any others. Then Barrick Gold Corp. (NYSE: ABX) offered to buy Equinox for $6.5 billion, provided that Equinox drop its offer for Lundin. That offer took Equinox about 2 heartbeats to accept.

Now Lundin’s CEO has resigned, effective June 30th. The resignation follows Lundin’s failure to attract a bid that it believed fairly valued the company. Lundin did have a merger agreement with Inmet Mining Corp. (OTC: IEMMF) that would have formed a $9 billion copper miner until the Equinox hostile offer came along. It sounds like Lundin’s CEO got outwitted in an acquisition chess game. If that’s the case, he is rightly looking for a new job.

Finally, the International Grains Council has lowered its forecast for global wheat production from its April estimate of 672.2 million tons to 667.3 tons. That compares with global production last year of 649.1 million tons.

Wheat prices will remain high as bad weather in Europe and the US are likely to lower harvests, even as wheat stockpiles will continue to shrink. The Council now expects global grain production of 1.803 billion tons in 2011-2012, up 4% from the previous year. Global consumption will total 1.812 million tons, furthering reducing stockpiles.

Corn prices are up nearly 2% around mid-day and wheat prices are up nearly 4%. The Market Vectors Agribusiness ETF (NYSE: MOO) is up about 1%, to $54.08, in a 52-week range of $35.62-$57.93. The PowerShares DB Agriculture Fund (NYSE: DBA) is also up about 1%, to $32.87, in a 52-week range of $22.85-$35.58. The Teucrium Corn Fund (NYSE: CORN) is up nearly 2%, to $46.03, in a 52-week range of $23.79-$48.77.

Paul Ausick

Filed under: Commodities, Currency, ETF Tagged: ABX, CLF, DBA, IEMMF, LUNCF, MOO