It has been about a month since the last earnings report for Cleveland-Cliffs Inc. (NYSE:CLF) . Shares have added about have lost about 5.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is CLF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cleveland-Cliffs Tops Q4 Earnings Estimates, Sales Lag
Cleveland-Cliffs reported net income of $318 million or $1.05 per share in fourth-quarter 2017, a nearly four-fold jump from $81 million or 34 cents recorded in the prior-year quarter. Adjusted earnings came in at 26 cents per share that surpassed the Zacks Consensus Estimate of 15 cents.
Sales for the quarter came in at $601 million, down 20.3% from $754 million in the prior-year quarter. The figure missed the Zacks Consensus Estimate of $637 million.
FY17 Results
The company reported net income of $371 million or $1.28 per share for 2017, increasing 86.4% year over year. Sales rose 9.5% year over year to $2.3 billion from $2.1 billion in the previous year.
Segment Performance
U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 5.4 million long tons in the fourth quarter, down roughly 21.6% year over year due to stronger than historical shipping pace during the first nine months of 2017 that led to reduced fourth-quarter shipments required to meet full-year customer nominations, as well as the earlier declared nomination reduction from a major customer.
Revenues per ton improved 12.9% year over year to $83.4. Cash production cost per ton increased 11.3% year over year to $58.8 in the quarter. The increase was mainly due to higher costs associated with maintenance and repairs, employee benefits and energy rates.
Asia Pacific Iron Ore: Sales volumes in the segment decreased 30.2% year over year to 2 million metric tons primarily due to lower production volumes.
Revenues per ton were $42.6, down 25.6% from the prior-year quarter. Cash production cost per ton was $44.6, up around 22.4% from the year-ago quarter. The increase was mainly due to higher mining costs.
Financial Position
Cleveland-Cliffs had $1 billion of cash and cash equivalents as of Dec 31, 2017 compared with $323 million as of Dec 31, 2016.
Long-term debt was at $2.3 billion as of Dec 31, 2017 compared with $2.2 billion as of Dec 31, 2016.
Capital expenditure was $77 million in the fourth quarter, compared with $23 million in the fourth quarter of 2016.
Outlook
For 2018, Cleveland-Cliffs projects sales and production volume for U.S. Iron Ore unit to be roughly 20 million long ton.
The company anticipates full-year selling, general and administrative (SG&A) expenses to be around $115 million, of which roughly $20 million is non-cash.
Cleveland-Cliffs expects total 2018 capital expenditures to be around $385 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
VGM Scores
At this time, CLF has an average Growth Score of C, however its Momentum is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, CLF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Cleveland-Cliffs Inc. (CLF): Free Stock Analysis Report
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