Cleveland-Cliffs (CLF) Tops Q4 Earnings Estimates, Sales Lag

Cleveland-Cliffs Inc. CLF 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.

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.

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 tonsprimarily 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.

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.

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.

Cleveland-Cliffs’ shares have moved up 5.4% in the last three months, underperforming the industry’s gain of 17.6%.

Cleveland-Cliffs carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Methanex Corporation MEOH, BASF SE BASFY and Kronos Worldwide Inc. KRO.

Methanex has an expected long-term earnings growth of 15% and sports a Zacks Rank #1 (Strong Buy). Shares of the company have rallied 31.5% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

BASF has an expected long-term earnings growth of 8.7% and flaunts a Zacks Rank #1. Shares of the company have moved up 23.5% in a year.

Kronos has an expected long-term earnings growth of 5% and carries a Zacks Rank #2 (Buy). Its shares have surged 127.2% over a year.

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