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Will Higher Shipments Aid Cleveland-Cliffs (CLF) Q2 Earnings?

Zacks Equity Research

Cleveland-Cliffs Inc. CLF is scheduled to release second-quarter 2019 results on Jul 19, before the opening bell.

The stock has rallied 29.6% in a year’s time, outperforming the industry’s 6.7% rise.

What the Zacks Model Says?

Our proven model shows that Cleveland-Cliffs is likely to beat estimates this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here, as you will see below:

Earnings ESP: Earnings ESP for Cleveland-Cliffs is +6.77%. The Most Accurate Estimate is pegged at 55 cents and the Zacks Consensus Estimate is pegged at 51 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 positive ESP makes us reasonably confident of a beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or #5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play in Q2

In April 2019, the company stated that its shipments expectation for the second quarter is 5 million long tons, considerably higher than 1.6 million long tons of mining and pelletizing sales volumes recorded in the first quarter.  

Pellet price realization in the first quarter was $94 per long ton, which was lower than its full year indicative guidance due to less favorable customer mix. However, it expects revenue rate to be higher for the remainder of 2019 as larger sample size of shipping volumes more closely represents its customer mix.   

Cleveland-Cliffs is also expected to benefit from higher iron ore prices in the to-be-reported quarter. Iron ore prices have enjoyed a bullish run in 2019 amid supply constraints with prices surging roughly 70% this year. Mine disaster in Brazil along with supply disruptions in Australia have triggered a spurt in the prices.

What Do the Estimates Indicate?

The Zacks Consensus Estimate for consolidated revenues for Cleveland-Cliffs is currently pegged at $613 million, suggesting a decline of around 14.1% year over year.

The Zacks Consensus Estimate for revenues from product sales and services is currently pegged at $587 million, indicating a decline of 17.8% year over year.

Cleveland-Cliffs Inc. Price and EPS Surprise


Cleveland-Cliffs Inc. Price and EPS Surprise

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


Other Stocks Poised to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows that they also have the right combination of elements to post earnings beat this quarter:

Franco-Nevada Corporation FNV has an Earnings ESP of +2.65% and carries a Zacks Rank #1.

Barrick Gold Corporation GOLD has an Earnings ESP of +13.51% and carries a Zacks Rank #2.

Carpenter Technology Corporation CRS has an Earnings ESP of +0.64% and carries a Zacks Rank #3.

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