The Zacks Analyst Blog Highlights: Parexel International, Covance, Cliffs Natural Resources, CONSOL Energy and Alpha Natural Resources

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Jul 27, 2012, 09:30 ET

CHICAGO, July 27, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Parexel International Corporation (Nasdaq:PRXL), Covance Inc. (NYSE:CVD), Cliffs Natural Resources Inc. (NYSE:CLF), CONSOL Energy Inc. (NYSE:CNX) and Alpha Natural Resources, Inc. (NYSE:ANR).

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Here are highlights from Thursday's Analyst Blog:

Parexel Launches BioPharm Unit

Leading provider of biopharmaceutical services, Parexel International Corporation (Nasdaq:PRXL) recently announced the launch of its Parexel BioPharm Unit. Parexel BioPharm will be dedicated to the unique requirements of small as well as medium-sized biopharmaceutical firms in order to provide support to companies towards achieving their development goals.

According to the company, BioPharm Unit's new delivery model is designed to provide high level of attention and improved services to clients. The model integrates Parexel's industry experience, expertise and a deep understanding of the needs of small and emerging biopharmaceutical enterprises. It aims to offer customized solutions to accelerate drug development procedures with savings on time and costs and without having to compromise on quality.

Per the management, small and mid-sized biopharmaceutical companies have been an important part of Parexel's customer base for the last 30 years. The company asserts that there is a significant difference between the research and development needs of large pharma sponsors and the small and mid-sized sponsors. The BioPharm Unit will specifically cater to the needs of smaller pharma and biotech sponsors.

Parexel affirms its functions in development of the majority of top selling biopharmaceuticals in the market. The company also has an enlarged international client base. The small and emerging biopharmaceutical concerns will benefit from its proven track record — an ability to come up with efficient and high quality solutions in a reduced time span.

Statistics indicate that 81% of current development programs in the biopharmaceutical industry are initiated by sponsors outside the top 25 biopharmaceutical companies. This implies that small and mid-sized companies are the growth catalysts of the biopharmaceutical industry.

The BioPharm Unit will support the advancement of these companies by offering expertise, operational excellence, global infrastructure and technological set-up. This will enhance the drug development cycle as well as the pipeline of the firms concerned. Management believes that the company's technical knowhow and research expertise will allow it to actualize custom-made solutions to meet the requirement of each customer.

Parexel is a leading biopharmaceutical services company. It provides clinical research, consultation, commercialization as well as technology products to various industries such as pharmaceutical, biotechnology and medical devices. Based in Waltham, Massachusetts, the company operates in three major segments — clinical research services, Parexel consulting and medical communications services and perceptive informatics. It competes with Covance Inc. (NYSE:CVD) among others.

Parexel currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Cliffs Natural Posts Mixed Q2

Cliffs Natural Resources Inc. (NYSE:CLF) posted earnings of $1.81 per share in the second quarter of 2012, down from $2.92 a year ago. The results, however, outshone the Zacks Consensus Estimate of $1.75. Lower prices and higher costs led to the decline in earnings. Moreover, the year-ago quarter's earnings were boosted by a sizable foreign currency hedging gain.

Sales for the quarter came in at $1,626 million, down 10% from $1,805.8 million posted in the prior year quarter, missing the Zacks Consensus Estimate of $1,762 million. Higher labor, mining and maintenance costs and lower pricing led to the fall in revenues in the reported quarter.

Segment Performance

U.S.Iron Ore: U.S. Iron Ore pellet sales volume decreased to 5.4 million tons in the quarter from 5.8 million tons in the second quarter of 2011. The timing of vessel shipments led to the decrease.

Revenues per ton plunged 13% year over year to $119.51. The decline resulted from lower pricing of sea borne iron ore and changes in customer mix. Cash costs per ton rose 9% to $62.59 driven by additional costs recognized related to the full consolidation of Empire Mine.

Eastern Canadian Iron Ore: Sales spiked 41% to 2.4 million tons in the quarter, mainly due to increased iron ore concentrate sales volume from the Bloom Lake Mine. Revenues per ton for the segment declined 28% year over year to $128.39 due to lower pricing of iron ore.

Cash costs per ton went up 20% to $107.14 due to higher labor, maintenance, and logistics costs at the Bloom Lake Mine. Higher repairs, maintenance and mining costs at the Wabush Mine also led to increased cash costs.

Asia Pacific Iron Ore: Sales volumes in the segment increased 39% to 3.1 million tons as Koolyanobbing Complex expansion project was completed in the quarter. Revenues per ton were $117.73, a decrease from $173.38 in the prior-year quarter due to weaker year-over-year pricing for seaborne iron and low grade iron ore in the company's sales mix.

Cash cost per ton in the Asia-Pacific Iron Ore segment declined 17% to $56.92 due to sales of low-grade ore, and accelerated mining costs, partially offset by lower royalty expenses and a favorable foreign exchange rate.

North American Coal: Sales Volumes increased 21% to 1.5 million tons, led by significantly higher sales and production volumes from Cliffs' low-volatile metallurgical coal mines. Revenues per ton inched up 1.4% to $120.32, driven by higher proportion of premium low-volatile metallurgical coal sales and partially offset by lower pricing of coal products. Cash cost per ton decreased 2.8% to $110.72 due to higher proportion of premium low-volatile metallurgical coal sales.

SonomaCoal and Amapa: Cliffs has a 45% economic interest in Sonoma Coal. Sales volumes in the segment were 369,000 tons in the quarter. Revenues per ton at Sonoma were $126.42, with cash costs of $98.50 per ton. During the quarter, Cliffs entered into an agreement to sell its economic interest in Sonoma Coal for approximately AUD$141 million in cash. The sale is expected to close by the fourth quarter of 2012.

Cliffs has a 30% ownership interest in Amapa, an iron ore operation in Brazil. During the quarter, Amapa produced approximately 1.5 million tons and posted an equity income of $1 million for Cliffs' share of operation.

Financial Position

Cliffs had $159.2 million of cash and cash equivalents as of June 30, 2012, compared with $521.6 million as of December 31, 2011. Long-term debt stood at $3,614.1 million as of June 30, 2012, compared with $3,608.7 million as of December 31, 2011.

Outlook

Cliffs reduced its forecast for selling, general and administrative expenses for 2012 to $300 million from its previously stated outlook of $325 million. The company's focus on tightening its corporate expenses and the timing of spending for certain corporate projects led to the reduced guidance.

The company reiterated its full-year cash outflow forecast of approximately $165 million to support future growth. Cliffs anticipates an effective tax rate of approximately 2% for 2012. The company expects depreciation, depletion and amortization to be approximately $530 million for 2012.

The company lowered its expectation of cash flow from operations to roughly $1.3 billion from its previous expectation of $1.7 billion. Cliffs reiterated its earlier forecast for capital expenditures of approximately $1 billion for 2012.

U.S.Iron Ore Outlook

The company reaffirmed its U.S. Iron Ore revenues expectations of $115-$120 per ton. Cash cost is expected to be in the range of $60-$65 per ton.

Eastern Canadian Iron Ore Outlook

The company expects revenues per ton to be in the range of approximately $130-$135, down from its previous expectation of $140-$145 per ton. As a result of the downward revisions, cash cost per ton was also revised to $100-$105 from the previous range of $80-$85.

Asia Pacific Iron Ore Outlook

For 2012, the company lowered its revenues per ton guidance to the range of $120-$125 from its earlier expectation of $140-$145. Cash cost is expected to be in the range of $65-$70, down from the previous forecast of $70-$75 per ton.

North American Coal Outlook

For 2012, the company reiterated its guidance and expects revenues in the range of $130-$135 per ton. Cash cost is expected to be in the range of $110-$115, up from the previously announced outlook of $105-$110 per ton.

SonomaCoal and Amapa Outlook

Cliffs expects the outlook for its interests in Amapa to be consistent with its previously reported full-year 2012 expectations.

Cliffs, which competes with CONSOL Energy Inc. (NYSE:CNX) andAlpha Natural Resources, Inc. (NYSE:ANR), currently retains a Zacks #4 Rank, reflecting a short-term (1 to 3 months) Sell rating. Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.

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