Cleveland-Cliffs (CLF) Q4 Earnings and Revenues Lag Estimates

Zacks Equity Research
·4 min read

Cleveland-Cliffs Inc. CLF logged profits (attributable to the company’s shareholders) of $64 million or 14 cents per share in the fourth quarter of 2020 compared with a profit of $63 million or 23 cents per share in the prior-year quarter. The bottom line in the reported quarter includes charges related to acquisition-related costs and amortization of inventory step-up.

Barring one-time items, adjusted earnings came in at 24 cents per share that trailed the Zacks Consensus Estimate of 28 cents.

Revenues shot up more than four-fold year over year to $2,256 million, partly driven by the acquisition of ArcelorMittal USA. However, it missed the Zacks Consensus Estimate of $2,309.1 million.

Cleveland-Cliffs, on Dec 9, 2020, successfully completed the buyout of all the operations of ArcelorMittal USA, which has been renamed as Cleveland-Cliffs Steel LLC. The company’s results consider the operating results of Cleveland-Cliffs Steel LLC from Dec 9 to Dec 31.

ClevelandCliffs Inc. Price, Consensus and EPS Surprise

ClevelandCliffs Inc. Price, Consensus and EPS Surprise
ClevelandCliffs Inc. Price, Consensus and EPS Surprise

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

Operational Highlights

Cleveland-Cliffs updated its segment structure following the ArcelorMittal USA buyout and now has one reportable segment, Steelmaking. The earlier Mining and Pelletizing division is now included within Steelmaking while other remaining operating segments are classified as Other Businesses.

The company reported Steelmaking revenues of $2.1 billion for the fourth quarter. Average net selling price per net ton of steel products was $880 for the quarter. External sales volumes for steel products were roughly 1.9 million net tons.

FY20 Results

Loss (as reported) for full-year 2020 was 32 cents per share, compared with earnings of $1.03 per share a year ago. Revenues rose nearly three-fold year over year to $5,319 million for the full year.

Financial Position

Cleveland-Cliffs ended 2020 with cash and cash equivalents of $112 million, down roughly 68% year over year. Long-term debt more than doubled year over year to $5,390 million at the end of the year.

Net cash used in operating activities was $261 million for full-year 2020.

Outlook

Moving ahead, Cleveland-Cliffs expects steel product shipments of roughly 4 million net tons for first-quarter 2021. It also envisions a significant improvement in first-quarter adjusted EBITDA on a sequential comparison basis.

For 2021, the company expects capital spending in the band of $600 million to $650 million. It also sees selling, general, and administrative expenses of around $450 million for the year.

Price Performance

Cleveland-Cliffs’ shares have rallied 151.5% in the past year compared with industry’s 72.4% growth.

Zacks Rank & Key Picks

Cleveland-Cliffs currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Impala Platinum Holdings Limited IMPUY, Fortescue Metals Group Limited FSUGY and BHP Group BHP.

Impala Platinum has an expected earnings growth rate of 195.9% for the current fiscal. The company’s shares have rallied around 78% in the past year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortescue has a projected earnings growth rate of 95.4% for the current fiscal. The company’s shares have surged around 173% in a year. It currently sports a Zacks Rank #1.

BHP Group has a projected earnings growth rate of 68.7% for the current fiscal year. The company’s shares have shot up around 68% in a year. It currently carries a Zacks Rank #2 (Buy).

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