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Q4 Earnings: Why Cleveland-Cliffs’ Upside Could Be Far from Over

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Cleveland-Cliffs’s Q4 2018 results

Cleveland-Cliffs (CLF) released its fourth-quarter earnings on February 8 before the markets opened. The company’s management held a conference call with analysts on the same day.

Cleveland-Cliffs reported adjusted EPS of $0.55, which missed earnings estimates of $0.59. Its revenue came in at $696 million, which was 36% higher YoY but missed analysts’ estimate of $715 million. The company’s adjusted EBITDA of $188 million was 40% higher YoY, while the net income rose 97% YoY to $610 million. Cliffs slightly missed the consensus estimate in its Q3 2018 earnings.

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CLF stock soared despite the miss

Cleveland-Cliffs (CLF) stock closed 8.6% higher on February 8 at $11.83. This rise is in contrast to a flat S&P 500 (SPY) and a decline of 0.25% in the Dow Jones Industrial Average Index (DIA). This surge in stock price for Cliffs came despite its slight miss on both the top and bottom lines. There are many reasons for the increase in CLF’s stock despite the miss, mainly because the company expects higher iron ore pellet premiums going forward in the wake of Vale’s (VALE) dam burst. Cliffs’ guidance for 2019 was always quite robust. Moreover, the company announced it would upgrade its productive capacity at the new HBI (hot-briquetted iron) plant to 1.9 million tons from 1.6 million tons previously.

YTD outperformance

Similar to 2018, Cleveland-Cliffs stock has significantly outperformed its peers year-to-date. Compared to CLF’s 54.0% rise, Steel Dynamics (STLD), Nucor (NUE), ArcelorMittal (MT), AK Steel (AKS), and U.S. Steel (X) have returned -19.0%, 16%, 6.3%, 30.0%, and 20.0%, respectively.

See Can Cleveland-Cliffs Stock Continue Outperforming Peers in 2019? for more on this topic.

Series overview

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

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