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Cleveland Cliffs: What’s Driving Wall Street’s Q4 Estimates?

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Feb. 5 2019, Updated 4:50 p.m. ET

Analysts’ estimates

Analysts’ EBITDA estimates reflect their expectations for a company’s future profitability. Analysts usually determine these estimates using revenue projections, margin assumptions, and cost projections.

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Earnings estimates

Wall Street analysts expect Cleveland-Cliffs (CLF) to see EBITDA of $227 million in the fourth quarter. While its revenue is expected to rise 22%, its EBITDA is expected to rise 79.0% YoY (year-over-year) during the quarter. Along with the rise in its revenue, the fall in CLF’s costs is likely to contribute to this significant jump.

According to estimates compiled by Thomson Reuters, the company’s EBITDA is expected to come in at $792 million in 2018, implying a YoY rise of 52%. Analysts have significantly bumped up their estimates for CLF’s 2018 EBITDA since the company reported its first-quarter results.

After a rise in 2018, however, analysts expect Cliffs’ EBITDA to fall 15% in 2019 and another 12% in 2020. In 2020, Cliffs is expected to start production at its hot briquetted iron plant, which should support its top and bottom lines in the long term.

Peers’ results

Among Cliffs’ US steel peers (DIA), AK Steel (AKS) posted adjusted EBITDA of $135 million in the fourth quarter, higher than analysts’ expectations. Its adjusted EBITDA margin was 8.1%, slightly higher than AK Steel’s guidance. U.S. Steel Corporation (X) posted an adjusted EBITDA of $535 million in the fourth quarter, which missed analysts’ estimates.

Steel Dynamics (STLD) posted record earnings in 2018.

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