It has been about a month since the last earnings report for Cleveland-Cliffs (CLF). Shares have added about 14.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cleveland-Cliffs due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cleveland-Cliffs’ Q2 Earnings & Revenues Beat Estimates
Cleveland-Cliffs slipped to a net loss of $108.1 million or 31 cents per share in second-quarter 2020 from a profit of $160.8 million or 57 cents per share in the prior-year quarter. The loss per share for the reported quarter was narrower than the Zacks Consensus Estimate of a loss of 51 cents.
Revenues rose 47% year over year to $1,092.7 million. Moreover, the figure surpassed the Zacks Consensus Estimate of $1,067.3 million.
Mining and pelletizing pellet production and sales volume were around 2 million long tons and 4.8 million long tons in the second quarter, down 60.6% and 23.6% year over year, respectively.
Realized revenues per long ton fell 15.9% year over year to $94.73.
Cash cost of goods sold rate per long ton was up 16% year over year to $77.71.
As of Jun 30, 2020, Cleveland-Cliffs had cash and cash equivalents of $73.7 million, down from $377.2 million as of Jun 30, 2019. Long-term debt was $4,451.6 million at the end of the second quarter, up 111.5% year over year.
Net cash used in operating activities was $299.2 million for the six months ended Jun 30, 2020.
Cleveland-Cliffs stated that it anticipates idle costs during the third quarter to be less than $50 million and minimal in the fourth quarter, which will lead to a substantial improvement in unit cost performance.
Moreover, the company expects to see positive free cash flow in the second half of 2020, which includes the capital spending necessary to complete the Toledo HBI project. Notably, the company expects capital expenditure for the remainder of 2020 to be $250 million, which includes $110 million in remaining HBI spend and $25 million in capitalized interest.
The company also expects to generate more than $100 million in cash from the release of working capital during the second half of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -275.76% due to these changes.
At this time, Cleveland-Cliffs has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cleveland-Cliffs has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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