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Why You Should Add Cleveland-Cliffs (CLF) to Your Portfolio Now

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Cleveland-Cliffs Inc. (CLF - Free Report) stock looks promising at the moment. The company’s shares have rallied more than 49% year to date.

We are optimistic regarding the company’s prospects and believe that the time is right to add the stock to your portfolio. The stock looks promising and is poised to carry the momentum ahead.

Let's see what makes this stock a suitable investment option at the moment.

An Outperformer

Cleveland-Cliffs has outperformed the industry it belongs to in the past year. The company’s shares have surged 47.5% compared with 27.2% rise of the industry. The company also outpaced the S&P 500’s rise of 18.3% over the same time frame.

Upbeat Views

In third-quarter 2020 earnings call, Cleveland-Cliffs stated that it expects 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 consideration higher shipments from the Mining & Pelletizing and the Steel & Manufacturing segments as well as an expected lowering of idle costs.

Synergistic Acquisitions

Cleveland-Cliffs’ complementary acquisitions reflect bright prospects. In December 2019, Cleveland-Cliffs announced that it has entered into a definitive merger agreement with AK Steel. The transaction was successfully completed in March 2020.

The merger enables the company to offer high-value iron ore and steel solutions, mainly across North America. It enables Cleveland-Cliffs to become a vertically-integrated steel company.  The merger is projected to generate around $151 million of annual cost synergies.

Further, Cleveland-Cliffs is expected to gain 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.

Moreover, the deal will help the company become North America’s biggest iron ore pellet producer with annual capacity of 28 million long tons. The transaction is also expected to achieve around $150 million of estimated annual cost savings. The company expects the transaction to close this month, subject to other customary closing approvals and conditions.  

Positive Estimate Revisions

Earnings estimate revisions have the greatest impact on stock prices. The Zacks Consensus Estimate for Cleveland-Cliffs’ fourth-quarter earnings moved up 61.5% in the past two months.

 

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 Impala Platinum Holdings Ltd. (IMPUY - Free Report) , 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.

Impala Platinum has an expected earnings growth rate of 131.7% for fiscal 2021. Its shares have returned 29.5% in the past year.

BHP Group has an expected earnings growth rate of 32.4% for fiscal 2021. The company’s shares have gained 20.5% in the past year.

Silvercorp Metals has an expected earnings growth rate of 40% for fiscal 2021. The company’s shares have increased 13.2% in the past year.

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