Cleveland-Cliffs Beats Market Estimates & Raises Full-Year Guidance Due To Favorable Market Environment

Cleveland-Cliffs (NYSE: CLF) released its second-quarter results on 20th July and conducted a conference call with analysts the same day. The company reported a strong set of results by beating both earnings and revenue estimates for the quarter. The company reported a diluted EPS (Non-GAAP) of $0.76 and a consolidated revenue of $714 million, 171% and 52% higher, respectively, than the reported numbers a year ago. The company’s solid results were backed by higher iron ore prices and sales volume.

The imposed steel tariffs have proved to be beneficial for Cliffs as evident from the company’s second-quarter results. The steel tariffs have likely increased the demand for domestically produced U.S. steel and hence resulted in an enhanced demand environment for domestically produced iron ore (primary raw material used in steel production). Increased demand has, in turn, translated into higher shipment volume and higher realized revenue per ton for Cliffs. The company reported a 38% increase in its sales volume and a 16% increase in its average realized price per long ton as a result of the same. Cliffs’ management also indicated that a general strength in the steel industry was driven by the recently implemented U.S. tax reform.

Consequently, on the backdrop of such a strong market environment, Cliffs has upgraded its full-year 2018 sales outlook by roughly 2% to 20 million long tons and its price outlook by roughly 3% (assuming mid-points) to a range of $105 to $110 per long ton. This is a second full-year upgrade communicated by the company in 2018, denoting its solid ground in the U.S. iron ore market. The company particularly stands at a highly advantageous position in the second half of the year given that it would be selling almost 64% (~13 million long tons) of its guided iron ore sales volume during this period and at comparatively higher prices.

Therefore, we have updated our full-year 2018 estimates based on these data points. You can modify our assumptions by using our interactive dashboard: Cliffs’ Q2’18 Results Have Made The Stock More Attractive, to arrive at your own fair prices estimate for the company.

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