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Cleveland-Cliffs Stock Rises on Strong Earnings, Upbeat Guidance

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Q2 2018 results are a solid beat

Cleveland-Cliffs (CLF) released its second-quarter earnings on July 20 before the markets opened. It held a conference call with analysts the same day. CLF reported EPS of $0.76, beating the consensus estimate of $0.53 by 43.4%. Its revenue came in at $714.3 million, which was higher than the consensus analyst estimate of $642 million.

Its US sales volumes were 38% higher YoY (year-over-year), while its realized revenues also showed a positive momentum and grew 16% YoY to $112.60 per ton.

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CLF stock soared on the beat and on upbeat guidance

CLF stock soared and closed 12.6% higher on July 20 at $9.96. The overall market performance was weaker on July 20, with the S&P 500 Index (SPY) finishing 0.11% lower and the Dow Jones Industrial Average (DIA) (DOW) almost flat.

The stock rose from the company’s solid earnings beat but also from management’s upbeat guidance. The company increased its guidance for its US sales volume and expectation for US realized prices. As we highlighted in What to Look Forward to in Cleveland-Cliffs’ Q2 2018 Results, Cliffs increased its expectation for US realized prices to $105–$110 per ton in 2018, from $102–$107 per ton previously.

CLF also increased its guidance for its US iron ore pellet sales volume from 20.5 million tons to 21 million tons for 2018. Investors might recall that it raised its volume guidance during its Q1 2018 results from 20 million tons to 20.5 million tons on strong demand dynamics. CLF’s new guidance implies a growth of 12.5%.

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YTD performance

With the current gain, CLF stock has risen 38.1% YTD (year-to-date), outperforming its US peers U.S. Steel Corporation (X), AK Steel (AKS), Steel Dynamics (STLD), and Nucor (NUE), which have returned 5.5%, -14%, 8.9%, and 4.2%, respectively, in the same period.

Series overview

In this series, we’ll try to gauge Cleveland-Cliffs’s (CLF) short-term and long-term fundamentals. We’ll discuss its Q2 2018 results, its conference call highlights, management guidance, and outlook. We’ll also see how the company is planning to progress on new growth initiatives.

Cleveland-Cliffs’s CEO Lourenco Goncalves provided insight into US steel demand and his view on its future outlook. We’ll look at that in the next part of this series.

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