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What to Expect from Cleveland-Cliffs’ Q3 Earnings

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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? 

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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.

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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.

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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.

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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.

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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.

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