A month has gone by since the last earnings report for Cleveland-Cliffs (CLF). Shares have added about 5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Cleveland-Cliffs’ Q3 Earnings Beat, Sales Miss Estimates
Cleveland-Cliffs recorded a profit of $91 million or 33 cents per share in third-quarter 2019, down from a profit of $438 million or $1.41 in the prior-year quarter. The bottom line in the year-ago quarter included a one-time gain associated with historical changes in foreign currency translation. Nevertheless, earnings per share surpassed the Zacks Consensus Estimate of 25 cents.
Revenues fell 25.1% year over year to $555.6 million and missed the Zacks Consensus Estimate of $565.4 million.
Mining and pelletizing pellet sales volume was 5.8 million long tons in the third quarter, down 11.3% year over year. Per the company, lower customer nominations were partly offset by inter-company sales to the Toledo HBI facility during the quarter.
Realized revenues per long ton declined 9.5% year over year to $95.65. The results were affected by an unfavorable true-up of earlier sold volumes caused by lower HRC prices and pellet premiums.
Cash cost of goods sold rate per long ton rose 1.1% year over year to $63.20.
At the end of the third quarter, Cleveland-Cliffs had cash and cash equivalents of $399.3 million, down 55.5% year over year. Long-term debt was $2,109.1 million, down 8.3% year over year.
Net cash provided by operating activities was $388.1 million in the first nine months of 2019 compared with net cash provided by operating activities of $188.7 million in the year-ago period.
The company revised its full-year sales volume guidance to 19.5 million long tons, down from 20 million long tons expected earlier. However, production volume is likely to remain unchanged at 20 million long tons. The company continues to expect mining and pelletizing cash cost of goods sold rate in the band of $62-$67 per long ton.
Moreover, Cleveland-Cliffs expects to realize mining and pelletizing revenue rates in the band of $97-$102 per long ton for 2019.
The company now expects total capital expenditure for 2019 in the range of $625-$675 million, down from $650-$700 million expected earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -47.1% due to these changes.
At this time, Cleveland-Cliffs has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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