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Will Lower Prices Hurt Cleveland-Cliffs' (CLF) Q3 Earnings?

Zacks Equity Research

Cleveland-Cliffs Inc. CLF is scheduled to release third-quarter 2019 results on Oct 23, before the opening bell.

The stock has tumbled 38.9% in a year’s time compared with the industry’s 3% decline.



Factors at Play in Q3

In July, the company stated that it expects sales volumes for the third quarter to be 5.5 million long tons or more.  

The Zacks Consensus Estimate for third-quarter consolidated revenues for Cleveland-Cliffs is currently pegged at $565 million, which suggests a decline of nearly 24% sequentially and fall of 23.9% year over year.

The Zacks Consensus Estimate for Mining and pelletizing pellet production volume is currently pegged at 5 million long tons that indicates a fall of 3.4% sequentially.

Also, the consensus mark for Mining and pelletizing pellet sales volume is currently pegged at 5.9 million long tons, which calls for a decline of 5.7% sequentially.

The company benefited from higher iron ore prices in the second quarter. Its realized revenues per ton were at a six-year-high mark of $113 in the second quarter, supported by higher iron ore prices and pellet premiums. However, iron ore prices weakened during the third quarter. As such, lower prices are likely to have impacted the company’s third-quarter results.

Moreover, lower steel prices may have hurt the company’s margins in the September quarter. Notably, some of the major U.S. steel producers came up with weaker-than-expected earnings guidance for the third quarter citing weaker steel prices. The benchmark hot-rolled coil steel prices went down in the second quarter and the trend continued in the third quarter, partly due to weak steel demand.  

What the Zacks Model Says?

Our proven model does not conclusively predict an earnings beat for Cleveland-Cliffs this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Cleveland-Cliffs is 0.00%. The Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 25 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 #5 (Strong Sell).

Cleveland-Cliffs Inc. Price and EPS Surprise

 

Cleveland-Cliffs Inc. Price and EPS Surprise

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

 

Stocks Poised to Beat Estimates

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

Franco-Nevada Corporation FNV has an Earnings ESP of +3.45% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation GOLD has an Earnings ESP of +1.89% and carries a Zacks Rank #3.

Iamgold Corporation IAG has an Earnings ESP of +50.00% and carries a Zacks Rank #3.

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