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Cleveland-Cliffs (CLF) Earnings & Sales Trounce Estimates in Q2

Zacks Equity Research

Cleveland-Cliffs Inc. CLF recorded a profit of $161 million or 57 cents per share in second-quarter 2019, compared with a profit of $165 million or 55 cents in the prior-year quarter. The bottom line in the reported quarter included an $18-million loss on extinguishment of debt.

Adjusted earnings for the reported quarter came in at 63 cents per share, outpacing the Zacks Consensus Estimate of 52 cents.

Revenues went up around 4% year over year to $743.2 million. The figure also topped the Zacks Consensus Estimate of $612.6 million.

Cleveland-Cliffs Inc. Price, Consensus and EPS Surprise

 

Cleveland-Cliffs Inc. Price, Consensus and EPS Surprise

Cleveland-Cliffs Inc. price-consensus-eps-surprise-chart | Cleveland-Cliffs Inc. Quote

Operational Highlights

Mining and pelletizing pellet sales volume was a record-high of 6.2 million long tons in the second quarter, up 4% year over year on the back of strong customer demand.  

Realized revenues per ton were flat year over year at $113, a six-year-high, as higher iron ore prices and pellet premiums were masked by reduced hot-rolled coil steel (“HRC”) prices.

Cash cost of goods sold per long ton rose around 8% year over year to $67. The increase was due to transportation and labor costs as well as higher costs associated with improved profitability outlook that include employee profit sharing and higher royalties.

Financial Position

At the end of the second quarter, Cleveland-Cliffs had cash and cash equivalents of $377.2 million, down around 53% year over year. Long-term debt was $2,104.5 million, down roughly 8% year over year.

Net cash provided by operating activities was $151.1 million in the first half of 2019, compared with net cash used by operating activities of $49.3 million for the same period a year ago.

The company repurchased 13 million common shares worth $129 million in the reported quarter. It has bought back 30 million shares since the initiation of the share repurchase program.

Outlook

The company has reaffirmed its full-year sales and production volume guidance at 20 million long tons. It also continues to expect mining and pelletizing cash cost of goods sold in the band of $62-$67 per long ton.

Moreover, Cleveland-Cliffs expects to realize mining and pelletizing revenue rates in the band of $109-$114 per long ton, a $1 per long ton increase compared with the comparable range it provided last quarter.

The company now expects to attain commercial production at its Toledo HBI plant in the first half of 2020, ahead of schedule. It now expects total capital expenditure for 2019 to be $650-$700 million, up from prior expectations of $555 million.

Price Performance

Cleveland-Cliffs’ shares have rallied 46.9% year to date, outperforming the industry’s 17% rise.


Zacks Rank & Other Key Picks

Cleveland-Cliffs currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks worth considering in the basic materials space include Flexible Solutions International Inc FSI, Israel Chemicals Ltd. ICL and Air Products and Chemicals, Inc. APD.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries a Zacks Rank #1 (Strong Buy). Its shares have surged around 146% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year and carries a Zacks Rank #1. Its shares are up roughly 10% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. The company’s shares have gained around 46% over the past year.  

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