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Cleveland-Cliffs' (CLF) Shares Up 73% in 3 Months: Here's Why
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Shares of Cleveland-Cliffs Inc. (CLF - Free Report) have rallied 72.6% in the past three months against the industry’s 1% decline and the S&P 500’s 24.9% rise.
The company has a market cap of around $4.5 billion. Average volume of shares traded in the past three months was nearly 10.5 million.
Let’s discuss some factors driving this stock.
Strong third-quarter results, upbeat view and bright prospects from synergistic acquisitions are driving Cleveland-Cliffs’ shares.
In third-quarter 2020, Cleveland-Cliffs’ adjusted earnings came in at 4 cents per share that beat Zacks Consensus Estimate of a loss of 18 cents.
Moreover, its revenues surged around 196% year over year to $1,646 million and surpassed the Zacks Consensus Estimate of $1,605.8 million.
The company stated that it expects further sequential improvement in its adjusted EBITDA performance in the fourth quarter based on the current pricing and normalization of operating rates. The view also takes into account higher shipments from the Mining & Pelletizing and the Steel & Manufacturing segments as well as an expected lowering of idle costs.
The company’s recent complementary acquisitions also reflect bright prospects. In December 2019, Cleveland-Cliffs entered into a definitive merger agreement with AK Steel and the transaction was successfully completed in March 2020. The merger enables Cleveland-Cliffs to offer high-value iron ore and steel solutions, mainly across North America. It also allowed the company to become a vertically-integrated steel company. The merger is projected to generate around $151 million of annual cost synergies.
The company is also expected to benefit from the acquisition of ArcelorMittal USA LLC, which was announced in September 2020. This $1.4-billion deal will make Cleveland-Cliffs the largest flat-rolled steel producer in North America. Further, it will become North America’s biggest iron ore pellet producer with annual capacity of 28 million long tons. Also, the transaction is expected to achieve around $150 million of estimated annual cost savings. Notably, the deal has received an early termination notice of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 from the Bureau of Competition of the Federal Trade Commission. The company expects the transaction to close in December 2020, subject to other customary closing approvals and conditions.
Moreover, earnings estimate revisions have greatest impact on stock prices. The Zacks Consensus Estimate for Cleveland-Cliffs’ fourth-quarter earnings moved up 26.7% in the past month.
Zacks Rank & Other Key Picks
Cleveland-Cliffs currently carries a Zacks Rank #2 (Buy).
Pretium Resources has an expected earnings growth rate of 25.5% for 2020. Its shares have returned 15.5% in the past year.
BHP Group has an expected earnings growth rate of 27.9% for fiscal 2021. The company’s shares have gained 10.5% in the past year.
Silvercorp Metals has an expected earnings growth rate of 40% for fiscal 2021. The company’s shares have increased 20.2% in the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Cleveland-Cliffs' (CLF) Shares Up 73% in 3 Months: Here's Why
Shares of Cleveland-Cliffs Inc. (CLF - Free Report) have rallied 72.6% in the past three months against the industry’s 1% decline and the S&P 500’s 24.9% rise.
The company has a market cap of around $4.5 billion. Average volume of shares traded in the past three months was nearly 10.5 million.
Let’s discuss some factors driving this stock.
Strong third-quarter results, upbeat view and bright prospects from synergistic acquisitions are driving Cleveland-Cliffs’ shares.
In third-quarter 2020, Cleveland-Cliffs’ adjusted earnings came in at 4 cents per share that beat Zacks Consensus Estimate of a loss of 18 cents.
Moreover, its revenues surged around 196% year over year to $1,646 million and surpassed the Zacks Consensus Estimate of $1,605.8 million.
The company stated that it expects further sequential improvement in its adjusted EBITDA performance in the fourth quarter based on the current pricing and normalization of operating rates. The view also takes into account higher shipments from the Mining & Pelletizing and the Steel & Manufacturing segments as well as an expected lowering of idle costs.
The company’s recent complementary acquisitions also reflect bright prospects. In December 2019, Cleveland-Cliffs entered into a definitive merger agreement with AK Steel and the transaction was successfully completed in March 2020. The merger enables Cleveland-Cliffs to offer high-value iron ore and steel solutions, mainly across North America. It also allowed the company to become a vertically-integrated steel company. The merger is projected to generate around $151 million of annual cost synergies.
The company is also expected to benefit from the acquisition of ArcelorMittal USA LLC, which was announced in September 2020. This $1.4-billion deal will make Cleveland-Cliffs the largest flat-rolled steel producer in North America. Further, it will become North America’s biggest iron ore pellet producer with annual capacity of 28 million long tons. Also, the transaction is expected to achieve around $150 million of estimated annual cost savings. Notably, the deal has received an early termination notice of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 from the Bureau of Competition of the Federal Trade Commission. The company expects the transaction to close in December 2020, subject to other customary closing approvals and conditions.
Moreover, earnings estimate revisions have greatest impact on stock prices. The Zacks Consensus Estimate for Cleveland-Cliffs’ fourth-quarter earnings moved up 26.7% in the past month.
Zacks Rank & Other Key Picks
Cleveland-Cliffs currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the basic materials space are Pretium Resources, Inc. , BHP Group (BHP - Free Report) and Silvercorp Metals Inc. (SVM - Free Report) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Pretium Resources has an expected earnings growth rate of 25.5% for 2020. Its shares have returned 15.5% in the past year.
BHP Group has an expected earnings growth rate of 27.9% for fiscal 2021. The company’s shares have gained 10.5% in the past year.
Silvercorp Metals has an expected earnings growth rate of 40% for fiscal 2021. The company’s shares have increased 20.2% in the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>