Investors in Cleveland-Cliffs Inc. (NYSE:CLF) had a good week, as its shares rose 9.5% to close at US$8.52 following the release of its quarterly results. It looks like the results were pretty good overall. While revenues of US$1.6b were in line with analyst predictions, statutory losses were much smaller than expected, with Cleveland-Cliffs losing US$0.02 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Cleveland-Cliffs

Following the latest results, Cleveland-Cliffs' three analysts are now forecasting revenues of US$7.26b in 2021. This would be a huge 100% improvement in sales compared to the last 12 months. Cleveland-Cliffs is also expected to turn profitable, with statutory earnings of US$0.96 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$7.73b and earnings per share (EPS) of US$0.88 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.

The average price target rose 15% to US$7.85, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Cleveland-Cliffs analyst has a price target of US$13.00 per share, while the most pessimistic values it at US$5.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Cleveland-Cliffs' growth to accelerate, with the forecast 100% growth ranking favourably alongside historical growth of 6.4% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.5% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Cleveland-Cliffs is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Cleveland-Cliffs' earnings potential next year. They also downgraded their revenue estimates, although industry data suggests that Cleveland-Cliffs' revenues are expected to grow faster than the wider industry. With that said, earnings are more important to the long-term value of the business. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Cleveland-Cliffs. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Cleveland-Cliffs analysts - going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for Cleveland-Cliffs (1 is a bit concerning!) that you need to take into consideration.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.