Cleveland-Cliffs (CLF) Stock Up on Q3 Earnings & Revenue Beat

Cleveland-Cliffs Inc. CLF shares rose 4.8% on Oct 23, after the company reported better-than-expected third-quarter 2020 results. Both the top and bottom lines surpassed the Zacks Consensus Estimate.

Earnings and Revenues Discussion

The company reported net income of $2.2 million or a loss of 2 cents per share in the third quarter compared with a profit of $91.8 million or 33 cents per share in the prior-year quarter. Third-quarter loss per share includes acquisition costs, severance and inventory step-up amortization. 

Barring one-time items, adjusted earnings came in at 4 cents per share that beat Zacks Consensus Estimate of a loss of 18 cents.

Revenues surged 196.3% year over year to $1,646 million and surpassed the Zacks Consensus Estimate of $1,605.8 million.

ClevelandCliffs Inc. Price, Consensus and EPS Surprise

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

Operational Highlights

Mining and pelletizing pellet production and sales volume were around 4.6 million long tons and 4.9 million long tons in the quarter, down 11.6% and 14.7% year over year, respectively.

Realized revenues per long ton rose 2.5% year over year to $98.06.
Cash cost of goods sold rate per long ton was up 8% year over year to $68.25.

In the Steel and Manufacturing, volumes in the Flat-rolled steel shipments were 1,117,000 tons. Average net selling price of flat-rolled steel was $1,006 per ton.

Financial Position

As of Sep 30, 2020, Cleveland-Cliffs had cash and cash equivalents of $56 million, down from $399.3 million as of Sep 30, 2019. Long-term debt declined 3.2% sequentially to $4,309.8 million at the end of the quarter.

Net cash used in operating activities was $53.2 million for the nine months ended Sep 30, 2020.

Outlook

Cleveland-Cliffs 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 improving view also takes into account higher shipments from both Mining & Pelletizing and Steel & Manufacturing segments as well as an expected lowering of idle costs.

For 2020, the company has lowered its capital spending budget to around $500 million. Expenditures related to the completion of the Toledo HBI plant are expected to be $65 million in the fourth quarter.

Price Performance

Cleveland-Cliffs’ shares have gained 15.1% in the past year compared with industry’s 13.1% growth.

Zacks Rank & Other Key Picks

Cleveland-Cliffs currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Barrick Gold Corporation GOLD and Equinox Gold Corp. EQX. While Agnico Eagle and Barrick sports a Zacks Rank #1, Equinox carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 107.2% for 2020. Its shares have returned 36% in the past year.

Barrick has an expected earnings growth rate of 100% for 2020. The company’s shares have gained 59.9% in the past year.

Equinox has an expected earnings growth rate of 155.2% for 2020. The company’s shares have surged 85.3% in the past year.

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