Cleveland-Cliffs (CLF) Up 24.5% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Cleveland-Cliffs Inc. (NYSE:CLF) . Shares have added about 24.5% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CLF due for a pullback? 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 Q1 Earnings and Sales Estimates

Cleveland-Cliffs reported a net loss of $84.3 million or 29 cents per share in first-quarter 2018 compared with a net loss of $28.1 million or 11 cents recorded in the prior-year quarter.

Notably, the company has the new revenue recognition standard, ASC Topic 606, under which revenues will generally be recognized upon delivery for its U.S. Iron Ore customers. As a result of this and the annual winter closure of the Soo Locks, net income and revenues will be relatively lower than historical levels during the first quarter, per the company.

Barring one-time items, adjusted loss came in at 8 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 21 cents.

Cleveland-Cliffs posted first-quarter consolidated revenues of $239 million, down 48.3% year over year. However, the figure beat the Zacks Consensus Estimate of $197.1 million.

Segment Performance

U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 1.6 million long tons in the first quarter, down roughly 48.4% year over year due to lower carryover tonnage from the prior year nomination along with the adoption of the new revenue recognition standard.

Realized revenues per ton improved 32% year over year to $105, mainly driven by a favorable pricing adjustment resulting from considerable increase in domestic hot-rolled coil steel pricing.

Cash production cost per long ton decreased 2% year over year to $57.05 in the quarter. The decline was mainly due to lower sales volumes and standard cost methodology.

Asia Pacific Iron Ore: Sales volumes in the segment fell 46% year over year to 1.7 million metric tons primarily due to lower production volumes.

Realized revenues per ton were $31.10, down 43% from the prior-year quarter and cash production cost per ton was $66.36.

Financial Position

Cleveland-Cliffs had $786.6 million of cash and cash equivalents as of Mar 31, 2018 compared with $295.3 million as of Mar 31, 2017.

Long-term debt was $2,308.2 million as of Mar 31, 2018 compared with $1,642.9 million as of Mar 31, 2017.

Outlook

For 2018, Cleveland-Cliffs projects sales and production volume for U.S. Iron Ore unit to be 20.5 million long tons (up from roughly 20 million long tons) and 20 million tons, respectively.

The company maintained that it anticipates full-year selling, general and administrative expenses to be around $115 million, of which roughly $20 million is non-cash.

Cleveland-Cliffs expects to spend $225 million for the Toledo HBI Project this year, which was reduced by $25 million due to further development and refined timing of the project spending plan. The company has maintained sustaining capital expectation of $85 million in 2018 and Northshore Mine upgrade spending expectation of $50 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 15.2% due to these changes.

Cleveland-Cliffs Inc. Price and Consensus

VGM Scores

At this time, CLF has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise CLF has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.