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Cleveland-Cliffs Shares Up 16% YTD: What's Driving the Stock?

Shares of Cleveland-Cliffs Inc. CLF have gained 16.1% year to date against the industry’s 13.6% decline.



The company has a market cap of roughly $2.5 billion. Average volume of shares traded in the past three months was around 9,541.3K.  

Let’s take a look at the factors that are driving this mining company.

Driving Factors

Strong demand for pellets, debt-reduction actions along with bright prospects from the hot briquetted iron (HBI) project have contributed to the rally in Cleveland-Cliffs’ shares.

In October, Cleveland-Cliffs maintained 2018 U.S. Iron Ore sales and production volume expectations at 21 million long tons and 20 million tons, respectively. Cash cost of goods sold and operating expense expectations were kept unchanged at $58-$63 per long ton.

In the third quarter, the company delivered 10% year-over-year growth in sales volume, courtesy of higher customer demand for pellets. It expects shipments to pick up pace in the fourth quarter.

Moreover, debt reduction and the HBI project continue to be the top priorities for the company. Its long-term debt was $2,300 million at the end of third quarter, down from $2,304.2 million at the end of 2017. Moreover, the company continues to expect net debt below $1 billion by the end of the year. Efforts to lower debt will reduce the company’s annualized interest expenses. Moreover, the company’s cash and cash equivalents jumped nearly four-folds to $897.1 million at the end of third-quarter 2018.

From early 2019, Cleveland-Cliffs is expected to divert roughly 500,000 long tons of DR-grade pellets to its Toledo site for preparing the start-up of HBI plant in 2020. Per the company, there is 3.5 million metric tons per year of demand for imported pig iron and other ore-based metallics within the Great Lakes along with several million tons of demand for Busheling scrap. The company will produce around 1.6 million metric tons per year of HBI. The prospects of HBI seems bright in the foreseeable future.

Cleveland-Cliffs Inc. Price and Consensus

 

Cleveland-Cliffs Inc. Price and Consensus | Cleveland-Cliffs Inc. Quote

 

Zacks Rank & Stocks to Consider

Cleveland-Cliffs currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are CF Industries Holdings, Inc. CF, Nexeo Solutions, Inc. NXEO and The Mosaic Company MOS, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained 2.3% in the past year.

Nexeo Solutions has an expected long-term earnings growth rate of 30.6%. Its shares have moved up 6.6% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have surged 24.1% in the past year.

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