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Cleveland-Cliffs Inc. CLF is scheduled to release first-quarter 2018 results before the opening bell on Apr 20.
Last quarter, the company delivered a positive earnings surprise of 73.3% by posting adjusted earnings of 26 cents per share, which comfortably surpassed the Zacks Consensus Estimate of 15 cents.
However, sales declined roughly 20.3% year over year to $601 million in the fourth quarter, missing the Zacks Consensus Estimate of $637 million.
Notably, Cleveland-Cliffs beat the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with an average negative surprise of 7.8%.
Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.
Cleveland-Cliffs Inc. Price and EPS Surprise
Cleveland-Cliffs Inc. Price and EPS Surprise | Cleveland-Cliffs Inc. Quote
Factors at Play
Cleveland-Cliffs, during its fourth-quarter 2017 earnings call, stated that it expects first-quarter volumes to be seasonally light (roughly 1 million long tons), which will be offset by higher volumes in the remaining three quarters.
Cleveland-Cliffs expects price realization for the quarter to be roughly $75 per long ton, much lower than $83.4 recorded last quarter. Per the company, reasons for lower price realization include factors like lower reported volume driven by the winter shipping restrictions, negative carry-over effects and an unfavorable customer mix dominated by rail delivery.
The Zacks Consensus Estimate for consolidated revenues for the first quarter is $197.6 million, reflecting a decrease of around 57.2% year over year and 67.1% from last quarter.
Cleveland-Cliffs’ total sales volume for the U.S. Iron Ore segment is projected to decrease roughly 81.4% sequentially, as the Zacks Consensus Estimate for the first quarter is currently pegged at 1 million long tons.
Revenues per ton for the U.S. Iron Ore segment for the first quarter are likely to decline around 9.6% sequentially, as the Zacks Consensus Estimate for the quarter is currently pegged at $75 per ton.
Total sales volume for the Asia Pacific Iron Ore segment for the first quarter is projected to decrease roughly 2.4% sequentially, as the Zacks Consensus Estimate for the quarter is currently pegged at 2 million long tons.
Revenues per ton for the Asia Pacific Iron Ore segment is likely to decline around 8.5% sequentially, as the Zacks Consensus Estimate for the quarter is currently pegged at $39 per ton.
Cleveland-Cliffs is facing a challenging operating environment in its Australian operations. Last quarter, the company recorded a year-over-year decline in sales volume and a negative adjusted EBITDA of $3 million for the Asia Pacific Iron Ore segment. Moreover, the Australian dollar exchange rate has been unfavorable over the last few months. The company, during its fourth-quarter call, noted that it will likely cease its mining operations in Australia later this year. This may affect its margins in 2018.
The stock has lost 18.1% in the last three months, underperforming the industry’s 6.5% decline.
Our proven model does not conclusively show that Cleveland-Cliffs is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Cleveland-Cliffs for the first quarter is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both currently pegged at a loss of 19 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cleveland-Cliffs currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:
Allegheny Technologies Incorporated ATI has an Earnings ESP of +9.38% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
FMC Corporation FMC has an Earnings ESP of +1.43% and carries a Zacks Rank #2.
Kinross Gold Corporation KGC has an Earnings ESP of +15.39% and carries a Zacks Rank #3.
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