The earnings season for U.S. steel companies started with Steel Dynamics’ third-quarter earnings release. Nucor and Cleveland-Cliffs are scheduled to release their earnings this week. When will Cleveland-Cliffs report its earnings? What do analysts project for the company?
Cleveland-Cliffs' earnings date
Cleveland-Cliffs will likely report its third-quarter earnings on Oct. 23 at 7:00 a.m. ET. The company will hold a conference call at 10:00 a.m. ET. The analysts polled by Tikr expect Cleveland-Cliffs to report revenues of $1.67 billion in the third quarter, which is a YoY increase of more than 200 percent. The surge is partly due to the acquisition of AK Steel that Cleveland-Cliffs completed earlier this year.
Analysts expect Cleveland-Cliffs to report an adjusted EPS of -$0.12 in the third quarter. The company posted losses in the last two quarters amid the fall in U.S. steel prices. However, analysts expect the company to post a profit in the fourth quarter.
Why did Cleveland-Cliffs suspend its dividend in April?
Cleveland-Cliffs announced a dividend of $0.06 in February, which was paid on Apr. 4. When the COVID-19 pandemic took a toll on U.S. steel prices, Cleveland-Cliffs suspended its dividend in April. Other metal and mining companies also cut their dividends in a bid to conserve cash.
How could Cleveland-Cliffs stock react to its earnings?
So far, Cleveland-Cliffs stock is down 7.4 percent in 2020. While some of the other industrial metals like copper have surged to multi-year highs, U.S. steel prices are still languishing. Despite the Section 232 tariffs that President Trump imposed in 2018, U.S. steel companies haven’t seen a revival. Many people opposed the tariffs. They argued that the tariffs would have a negative impact on the steel industry's employment as well as downstream steel users.
U.S. steel companies announced price hikes, which helped bring price stability. The demand environment has also picked up, which should support the pricing environment. During Cleveland-Cliffs' third-quarter earnings call, investors should watch for management’s commentary on the outlook for U.S. steel prices.
Analysts' ratings before Cleveland-Cliffs' Q3 earnings
According to estimates compiled by CNN, Cleveland-Cliffs stock has a median target price of $6.20, which is 23.2 percent below its current stock prices. Among the eight analysts covering the stock, two have a buy rating, while six have a hold rating. Wall Street’s pessimism about Cleveland-Cliffs looks somewhat unwarranted.
Over the last year, Cleveland-Cliffs has transformed into an integrated steel mill from an iron ore producer. Earlier this year, the company completed the acquisition of AK Steel. In September, Cleveland-Cliffs announced the acquisition of ArcelorMittal’s U.S. assets. The recent uptrend in U.S. steel prices might continue into the first quarter of 2021 as end-users restock inventories. Given the growth prospects, Cleveland-Cliff’s risk-reward proposition looks favorable at these levels.