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Analysts Expect a Steep Revenue Fall for CLF in Q1—Here’s Why

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Revenue to fall sharply in the first quarter

Analysts polled by Thomson Reuters expect Cleveland-Cliffs (CLF) to post revenue $120 million in the first quarter, which implies a fall of 49.5% YoY (year-over-year).

The first quarter is a seasonally light period for Cliffs in terms of tonnage and price due to the annual closure of the Soo Locks, which limits shipments on the Great Lakes. This closure limits the company’s deliveries to rail only.

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Seasonally weaker period

Cleveland Cliffs’ CEO, Lourenco Goncalves, said during the company’s fourth-quarter earnings conference call, “Q1 is almost a write-off in terms of the contribution to the year.” Analysts’ revenue projections also imply that just 5.3% of their overall revenue estimate for 2019 is expected to be generated during the first quarter.

Revenue catalysts in 2019 and beyond

For 2019, CLF has guided for volumes of 20.0 million tons in its mining and pelletizing division. While its sales volume guidance implies a fall of 3% YoY, it’s almost the full capacity the company can deliver—at least in the medium term. Analysts expect CLF to see a revenue fall of 3% for the year, in line with its lower shipments.

Among Cliffs’ US (DIA) peers, Steel Dynamics (STLD) released its first-quarter earnings results on April 22. Steel Dynamics’ earnings were worse than expected in terms of both its top and bottom lines. Nucor (NUE) released its earnings results on April 23, and AK Steel (AKS) and U.S. Steel Corporation (X) are expected to release their earnings results next week.

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