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Cleveland-Cliffs (CLF) to Report Q3 Earnings: What's in Store?

Cleveland-Cliffs (CLF) is expected to have benefited from higher steel demand and prices and contributions from acquisitions in Q3.

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This story originally appeared on Zacks

Cleveland-Cliffs Inc. CLF is slated to release third-quarter 2021 results before the opening bell on Oct 22. Benefits of higher steel prices and contributions of AK Steel and ArcelorMittal USA acquisitions are likely to get reflected on the company’s performance.



The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missed twice. It has a trailing four-quarter earnings surprise of roughly 28.2%, on average. The company posted a negative earnings surprise of around 1.4% in the last reported quarter.

 

The stock has rallied 163.1% in a year’s time compared with the industry’s 17% rise.

- Zacks

 

Zacks Investment ResearchImage Source: Zacks Investment Research





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

What do the Estimates Say?

Cleveland-Cliffs expects adjusted EBITDA of around $1.8 billion for the third quarter.



The Zacks Consensus Estimate for third-quarter consolidated revenues for Cleveland-Cliffs is currently pegged at $5,649 million, which calls for a rise of 243.2% year over year. The consensus estimate for Steelmaking revenues is $5,547 million, reflecting a 12.7% rise on a sequential comparison basis.

Some Factors at Play

Cleveland-Cliffs is likely to have benefited from higher steel prices in the third quarter. Steel prices are on an upswing on the back of robust demand and supply shortages. U.S. steel prices have rebounded strongly and hit record levels after plunging to pandemic-induced multi-year lows in August 2020. The benchmark hot-rolled coil prices shot past the $1,900 per short ton level in August 2021 and remained above that level through September. Higher domestic steel prices are likely to have boosted Cleveland-Cliffs’ margins in the quarter to be reported.



The company is also likely to have gained from its acquisitions of AK Steel and ArcelorMittal USA, which might have had a positive impact on its third-quarter revenues and earnings. It is also expected to have gained from strong end-market demand for steel. Solid demand across steel-consuming sectors is likely to have supported Cleveland-Cliffs’ shipments in the quarter to be reported.



However, Cleveland-Cliffs is likely to have faced some headwinds from softer iron ore prices in the third quarter. Iron ore prices have lost steam this year following a rally in 2020, hurt by China’s efforts to cut steel production to reduce carbon emissions and expectations of a pick-up in global iron ore supply. Lower demand in China weighed on iron ore prices in the September 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 -0.23%. The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $2.23. 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 #2.

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:



Olin Corporation OLN, scheduled to release earnings on Oct 21, has an Earnings ESP of +6.95% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.



Nutrien Ltd. NTR, scheduled to release earnings on Nov 1, has an Earnings ESP of +0.77% and carries a Zacks Rank #1.



The Chemours Company CC, scheduled to release earnings on Nov 4, has an Earnings ESP of +5.70% and carries a Zacks Rank #2.



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ClevelandCliffs Inc. (CLF): Free Stock Analysis Report

 

Olin Corporation (OLN): Free Stock Analysis Report

 

The Chemours Company (CC): Free Stock Analysis Report

 

Nutrien Ltd. (NTR): Free Stock Analysis Report

 

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