Schaeffer's Trading Floor Blog

Analyst Downgrades: McDonald's, Baker Hughes, and Cliffs Natural Resources

Analysts downwardly revised their ratings on MCD, BHI, and CLF

by 10/22/2012 9:19 AM
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Analysts are weighing in today on fast food behemoth McDonald's Corporation (NYSE:MCD - 88.72), oil & gas supplier Baker Hughes Incorporated (NYSE:BHI - 44.75), and coal producer Cliffs Natural Resources Inc (NYSE:CLF - 44.45). Here's a quick roundup of today's bearish brokerage notes.

  • MCD was hit with several price-target cuts this morning, after the company reported weaker-than-expected third-quarter earnings on Friday. Specifically, Jefferies lowered its price target to $83 from $88, while Lazard Capital and BMO also issued downward price-target adjustments. The equity has shed roughly 12% year-to-date, which may be attracting short-term put players. Schaeffer's put/call open interest ratio (SOIR) for MCD stands at 1.08, which ranks higher than 81% of comparable readings taken during the past year. In other words, near-term traders have been more put-heavy toward the stock just 19% of the time over the last 12 months.

  • A disappointing quarterly earnings report resulted in a flood of bearish attention for BHI today, as well. The security was hit with price-target cuts from Barclays ($55 from $58), Jefferies ($47 from $48), Susquehanna ($47 from $51), and UBS ($57 from $65), although Guggenheim and Sterne Agee raised their price targets for the equity. Given the stock's year-over-year loss of nearly 18%, it stands to reason that puts bought to open have more than doubled calls during the past month, as reflected by the stock's 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.32.

  • As CLF prepares to report quarterly earnings ahead of the opening bell on Wednesday, the stock was downgraded to "hold" from "buy" at Deutsche Bank in pre-market activity. Meanwhile, skeptics have been converging on the equity lately, which has declined by about 26% during the past year. In fact, short interest on CLF jumped by about 27% during the last two reporting periods, and now represents a lofty 19% of the equity's available float. It would take three days to unwind these bearish bets, at the security's average daily trading volume.

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