uploads///Revenue Estimates

What’s Priced In to CLF’s Revenue Estimates for Q4 2018?

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Feb. 5 2019, Updated 10:20 a.m. ET

Revenue to rise in the fourth quarter

Analysts polled by Thomson Reuters expect Cleveland-Cliffs (CLF) to post revenue $736 million in the fourth quarter, which implies a rise of 22.4% YoY (year-over-year). This expectation is the result of the company’s guidance for higher volumes.

At the midpoint, CLF expects to generate a 29% YoY increase in volumes in the fourth quarter and a 7% sequential increase in volumes.

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Lower steel prices partially offset volume increase

Despite the increase in its volumes, CLF’s revenue implies a decline of 1% sequentially in the fourth quarter mainly due to lower hot rolled coil and iron ore prices during the quarter. US steel prices, in particular, fell sharply in the quarter.

Revenue catalysts in 2018 and beyond

For 2018, CLF has guided for volumes of 21.0 million tons in its US iron ore division, implying a rise of ~12.5% YoY. Analysts, however, are anticipating a rise of just 2.9% in revenue for the year. This difference is most likely the result of the fact that Cliffs decided to close down its Asia-Pacific operations during the year, which hurt its top line.

In 2019, analysts expect the company to see a 7% fall in revenue YoY. Again, this fall will likely be attributable to lower steel prices along with the full impact of the company’s shutdown of its Asia-Pacific operations. In the next article, we’ll analyze analysts’ earnings estimates for CLF in the fourth quarter.

Among Cliffs’ US (DIA) peers that have released their earnings results, U.S. Steel’s (X) revenue fell short of analysts’ estimates. Steel Dynamics (STLD) and AK Steel (AKS) also missed their top line estimates. However, Nucor (NUE) managed to beat the top and bottom line estimates.

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