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Cliffs Natural (CLF) Q2 Earnings: A Surprise in Store?
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Cliffs Natural Resources, Inc. (CLF - Free Report) is set to release second-quarter 2016 results before the market opens on Jul 28. Last quarter, this mining company delivered a positive surprise of 75.86%.
Cliffs surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 19.00%.
Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
The company sees consistent economic growth in the U.S. to support domestic steel production and demand for steelmaking raw materials. Demand for steel n the U.S. is expected to be backed by strength in the automotive sector and a recovering housing market.
Cliffs is in the process of boosting its mining and transportation capacity globally. The company will also benefit from its pellet-supply contracts with its iron ore customers in the U.S., which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing.
Cliffs has implemented a strategic capital allocation plan to ensure the optimum utilization of cash. It is focused on providing maximum return to the shareholders by way of dividend distribution and share buybacks, while maintaining its organic growth pipeline.
Cliffs remains focused on deleveraging its balance sheet. The company’s total debt fell around 4% year over year to $2.7 billion at the end of 2015 and further reduced to $2.5 billion at the end of the first quarter. Its commitment to reduced debt will further bring down its interest expenses and have a favorable impact on the upcoming results.
The company recently cut a major supply pact with ArcelorMittal (MT - Free Report) . The contract ensures that Cliffs will remain ArcelorMittal USA’s sole outside iron ore pellet supplier until 2026. The new contract allows it to supply up to 10 million long tons of pellets to ArcelorMittal USA.
However, excess capacity still weighs on commodity prices. Cliffs has been significantly challenged by declining iron ore pricing, which is hurting its price realizations. Seaborne iron ore prices remain under pressure, thereby weighing on the company’s revenues.
Our proven model does not conclusively show that Cliffs is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Cliffs is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at breakeven.
Zacks Rank: Cliffs currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies in the basic materials sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
FMC Corp. (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2.
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Cliffs Natural (CLF) Q2 Earnings: A Surprise in Store?
Cliffs Natural Resources, Inc. (CLF - Free Report) is set to release second-quarter 2016 results before the market opens on Jul 28. Last quarter, this mining company delivered a positive surprise of 75.86%.
Cliffs surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 19.00%.
Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
The company sees consistent economic growth in the U.S. to support domestic steel production and demand for steelmaking raw materials. Demand for steel n the U.S. is expected to be backed by strength in the automotive sector and a recovering housing market.
Cliffs is in the process of boosting its mining and transportation capacity globally. The company will also benefit from its pellet-supply contracts with its iron ore customers in the U.S., which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing.
Cliffs has implemented a strategic capital allocation plan to ensure the optimum utilization of cash. It is focused on providing maximum return to the shareholders by way of dividend distribution and share buybacks, while maintaining its organic growth pipeline.
Cliffs remains focused on deleveraging its balance sheet. The company’s total debt fell around 4% year over year to $2.7 billion at the end of 2015 and further reduced to $2.5 billion at the end of the first quarter. Its commitment to reduced debt will further bring down its interest expenses and have a favorable impact on the upcoming results.
The company recently cut a major supply pact with ArcelorMittal (MT - Free Report) . The contract ensures that Cliffs will remain ArcelorMittal USA’s sole outside iron ore pellet supplier until 2026. The new contract allows it to supply up to 10 million long tons of pellets to ArcelorMittal USA.
However, excess capacity still weighs on commodity prices. Cliffs has been significantly challenged by declining iron ore pricing, which is hurting its price realizations. Seaborne iron ore prices remain under pressure, thereby weighing on the company’s revenues.
CLIFFS NATURAL Price and EPS Surprise
CLIFFS NATURAL Price and EPS Surprise | CLIFFS NATURAL Quote
Earnings Whispers
Our proven model does not conclusively show that Cliffs is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Cliffs is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at breakeven.
Zacks Rank: Cliffs currently has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies in the basic materials sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
FMC Corp. (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2.
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>