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What to Expect from Cliffs Natural Resources’ 2Q17 Earnings

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Part 6
What to Expect from Cliffs Natural Resources’ 2Q17 Earnings PART 6 OF 11

Gauging Revenue Upside for CLF in 2Q17 and Beyond

Revenue estimates

According to the consensus compiled by Thomson Reuters, Cliffs Natural Resources (CLF) is expected to earn revenues of $524 million for 2Q17, implying year-over-year (or YoY) growth of 5.7%. Sequentially, revenues are expected to fall 14%, which is mostly due to lower seaborne iron ore and US HRC (hot rolled coil) prices.

For 2017, analysts expect Cliffs Natural Resources’ revenues to come in at ~$2.4 billion. This implies an annual increase of 13% due to higher expected volumes and realized prices.

Gauging Revenue Upside for CLF in 2Q17 and Beyond

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Revenue catalysts

Cliffs Natural Resources’ guidance for its 2017 US volumes stood at 19.0 million tons compared to its actual volume of 18.3 million tons in 2016. The volumes for the Asia-Pacific division are expected to be flat YoY at 11.5 million tons. This guidance implies that the only incremental volumes that could support higher revenues should be 0.7 million tons of US volumes.

The rest of the implied growth in the company’s 2017 revenues should be derived from higher prices of iron ore and steel.

US steel prices remained steady in 2Q17, which should benefit the realized prices of US (SPY) (SPX) steelmakers such as U.S. Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT).

Gauging revenue upside

Analysts have downgraded their 2017 revenue estimates for Cliffs Natural Resources by 5.5% since the company released its 1Q17 results. This downgrade is mostly due to the decline in seaborne iron ore prices and increasing imports into the US. 

The pending Section 232 outcome could mean a restriction of imports, leading to increased market share for domestic steelmakers. In turn, this could be positive for Cliffs Natural Resources’ top line.

In the next article, we’ll analyze analysts’ earnings estimates for CLF in 2Q17.

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