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What's in Store for Cleveland-Cliffs (CLF) in Q3 Earnings?

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Cleveland-Cliffs Inc. (CLF - Free Report) is slated to release third-quarter 2020 results on Oct 23, before the opening bell.

The company has a trailing four-quarter positive earnings surprise of 49.4%, on average. The benefits of higher iron ore prices and merger with AK Steel are likely to get reflected in the company’s third-quarter performance.

The stock has gained 11.3% in a year’s time compared with the industry’s 15.1% rise.

Let’s see how things are shaping up for the upcoming announcement.

What to Expect in Q3

Cleveland-Cliffs, in its second-quarter call, stated that it anticipates idle costs during the third quarter to be less than $50 million, which will lead to an improvement in unit cost performance.

In June, the company announced that demand for its steel, iron ore and metallics products recovered considerably, which enabled it to restart the Toledo and Tilden facilities sooner than the company originally expected. Cleveland-Cliffs also restarted several other facilities idled due to the coronavirus pandemic, including Precision Partners, AK Tube, Mansfield Works and the Dearborn downstream facilities. The benefits from these actions are likely to get reflected in its third-quarter performance.

Cleveland-Cliffs is also likely to have gained from its merger with AK Steel, which might have had a positive impact on its quarterly performance. Notably, it is a major supplier to the automotive industry, both directly through its subsidiary AK Steel and indirectly through third-party clients. As demand in the automotive space improved in the third quarter, the company’s steel shipments and margins are likely to have benefited.

Other Factors at Play  

Demand strength in China on surging crude steel production has also propelled iron ore prices to their highest level in six years during the third quarter. A recovery in China is driving demand for the steel-making commodity, as reflected by rising imports. Moreover, worries over a supply shortage from Brazil, a country battered by coronavirus, are contributing to increase in iron ore prices. The worsening coronavirus situation in Brazil, a major producer, has put iron ore supply at risk. The benefits of higher iron prices stemming from these factors are likely to get reflected in Cleveland-Cliffs’ third-quarter results.

Q3 Sales Estimates

The Zacks Consensus Estimate for third-quarter consolidated revenues for Cleveland-Cliffs is currently pegged at $1,606 million, which calls for year-over-year rise of 188.8% and sequential growth of 46.9%.

ClevelandCliffs Inc. Price and EPS Surprise

ClevelandCliffs Inc. Price and EPS Surprise

ClevelandCliffs Inc. price-eps-surprise | ClevelandCliffs Inc. Quote

What the Zacks Model Says

Our proven model doesn’t 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 -0.91%. The Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at a loss of 19 cents and a loss of 18 cents, respectively. 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 #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Likely to Beat Estimates

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

Coeur Mining, Inc. (CDE - Free Report) , scheduled to release third-quarter 2020 results on Oct 28, has an Earnings ESP of +60.00% and sports a Zacks Rank #1.

Pan American Silver Corp. (PAAS - Free Report) , scheduled to release third-quarter 2020 earnings on Nov 4, has an Earnings ESP of +2.78% and carries a Zacks Rank #3.

Westlake Chemical Corporation (WLK - Free Report) , slated to release third-quarter 2020 earnings on Nov 3, has an Earnings ESP of +6.32% and carries a Zacks Rank #3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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