Cleveland-Cliffs (CLF) Q3 Earnings Beat, Sales Miss Estimates

Cleveland-Cliffs Inc. (NYSE:CLF) recorded a profit of $91 million or 33 cents per share in third-quarter 2019, down from a profit of $438 million or $1.41 in the prior-year quarter. The bottom line in the year-ago quarter included a one-time gain associated with historical changes in foreign currency translation. Nevertheless, earnings per share surpassed the Zacks Consensus Estimate of 25 cents.

Revenues fell around 25.1% year over year to $555.6 million and missed the Zacks Consensus Estimate of $565.4 million.

Operational Highlights

Mining and pelletizing pellet sales volume was around 5.8 million long tons in the third quarter, down 11.3% year over year. Per the company, lower customer nominations were partly offset by inter-company sales to the Toledo HBI facility during the quarter.

Realized revenues per long ton declined 9.5% year over year to $95.65. The results were affected by an unfavorable true-up of earlier sold volumes caused by lower HRC prices and pellet premiums.

Cash cost of goods sold rate per long ton rose around 1.1% year over year to $63.20.

Financial Position

At the end of the third quarter, Cleveland-Cliffs had cash and cash equivalents of $399.3 million, down around 55.5% year over year. Long-term debt was $2,109.1 million, down around 8.3% year over year.

Net cash provided by operating activities was $388.1 million in the first nine months of 2019 compared with net cash provided by operating activities of $188.7 million in the year-ago period.

Outlook

The company revised its full-year sales volume guidance to 19.5 million long tons, down from 20 million long tons expected earlier. However, production volume is likely to remain unchanged at 20 million long tons. The company continues to expect mining and pelletizing cash cost of goods sold rate in the band of $62-$67 per long ton.

Moreover, Cleveland-Cliffs expects to realize mining and pelletizing revenue rates in the band of $97-$102 per long ton for 2019.

The company now expects total capital expenditure for 2019 in the range of $625-$675 million, down from $650-$700 million expected earlier.

Price Performance

Cleveland-Cliffs’ shares have lost 35.5% in the past year against the industry’s 3.6% rise.

Zacks Rank & Key Picks

Cleveland-Cliffs currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation (NYSE:KGC) , Franco-Nevada Corporation (TSX:FNV) and Kirkland Lake Gold Ltd. (TSX:KL) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 190% for 2019. The company’s shares have surged 67% in the past year.

Franco-Nevada has a projected earnings growth rate of 49.3% for 2019. The company’s shares have rallied 42.8% in a year’s time.

Kirkland Lake Gold has an estimated earnings growth rate of 71.3% for the current year. Its shares have moved up 113.4% in the past year.

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