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Cleveland-Cliffs (CLF) to Post Q4 Earnings: What's in the Cards?

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Cleveland-Cliffs Inc. (CLF - Free Report) is slated to release fourth-quarter 2020 results before the opening bell on Feb 25. The benefits of higher iron ore and steel prices and contributions of AK Steel and ArcelorMittal USA acquisitions are likely to get reflected on the company’s fourth-quarter performance.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 72%. It posted an earnings surprise of 122.2% in the last reported quarter.

The stock has rallied 152.5% in a year’s time compared with the industry’s 54.6% rise.




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

What do the Estimates Say?

Cleveland-Cliffs, in January 2021, announced its preliminary results for the fourth quarter. The company expects consolidated revenues of around $2.2-$2.3 billion for the quarter, a roughly 320% increase over the prior-year quarter. It also sees adjusted EBITDA of around $280-$290 million, a roughly 150% increase over the year-ago quarter. The company also expects steel sales volume of 1.9 million net tons for the quarter.

The Zacks Consensus Estimate for fourth-quarter consolidated revenues for Cleveland-Cliffs is currently pegged at $2,309.1 million, which calls for a rise of 332.3% year over year.

The Zacks Consensus Estimate for revenues for the Mining and Pelletizing unit is currently pegged at $597 million, calling for a rise of 14.8% on a sequential comparison basis. The consensus mark for revenues for the Steel and Manufacturing unit stands at $1,503 million, which suggests a 34.6% sequential rise.

Some Factors at Play

Cleveland-Cliffs is likely to have gained from its acquisitions of AK Steel and ArcelorMittal USA, which might have had a positive impact on its fourth-quarter performance. Notably, it is a major supplier to the automotive industry, both directly through its subsidiary AK Steel and indirectly through third-party clients. Higher demand in the automotive space is expected to have boosted the company’s flat-rolled steel shipments in the fourth quarter.

Cleveland-Cliffs, on Dec 9, 2020, also successfully completed the buyout of all the operations of ArcelorMittal USA and its subsidiaries, becoming the largest flat-rolled steel producer in North America. Contributions of this acquisition are expected to reflect on its fourth-quarter results.

Moreover, demand strength in China on higher crude steel production propelled iron ore prices last year. A recovery in China boosted demand for the steel-making commodity, as reflected by higher imports. Steel production in China also gained steam on government infrastructure spending and a strong rebound in manufacturing activities. Moreover, worries over a supply shortage from major producer Brazil, a country battered by coronavirus, contributed to the rally in iron ore prices in 2020. Notably, iron ore prices surged to their highest levels in nine years in December 2020. Prices also shot up around 80% for 2020. As such, the benefits of higher iron prices stemming from these factors are likely to get reflected on Cleveland-Cliffs’ fourth-quarter results.

The company is also likely to have gained from higher steel prices in the quarter to be reported. Steel prices are on an upswing on the back of rising demand and supply shortages. Notably, U.S. steel prices have recovered strongly and hit record levels after plunging to pandemic-induced multi-year lows in August 2020. The benchmark hot-rolled coil prices started to recover in September and gained strength through the fourth quarter.

ClevelandCliffs Inc. Price and EPS Surprise


ClevelandCliffs Inc. Price and EPS Surprise

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


Zacks Model

Our proven model does not conclusively predict an earnings beat for Cleveland-Cliffs this season. 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 0.00%. The Zacks Consensus Estimate for earnings for the fourth quarter is currently pegged at 28 cents. 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 #3.

Stocks That Warrant a Look

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

Koppers Holdings Inc. (KOP - Free Report) , scheduled to release earnings on Feb 24, has an Earnings ESP of +23.20% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold Ltd. (KL - Free Report) , scheduled to release earnings on Feb 25, has an Earnings ESP of +5.57% and carries a Zacks Rank #3.
Franco-Nevada Corporation
(FNV - Free Report) , scheduled to release earnings on Mar 10, has an Earnings ESP of +1.79% 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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