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Cleveland-Cliffs (CLF) Tops Q4 Earnings Estimates, Sales Lag

Cleveland-Cliffs Inc.CLF reported net income of $318 million or $1.05 per share in fourth-quarter 2017, a nearly four-fold jump from $81 million or 34 cents recorded in the prior-year quarter. Adjusted earnings came in at 26 cents per share that surpassed the Zacks Consensus Estimate of 15 cents.

Sales for the quarter came in at $601 million, down 20.3% from $754 million in the prior-year quarter. The figure missed the Zacks Consensus Estimate of $637 million.

FY17 Results

The company reported net income of $371 million or $1.28 per share for 2017, increasing 86.4% year over year. Sales rose 9.5% year over year to $2.3 billion from $2.1 billion in the previous year.

Segment Performance

U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 5.4 million long tons in the fourth quarter, down roughly 21.6% year over year due to stronger than historical shipping pace during the first nine months of 2017 that led to reduced fourth-quarter shipments required to meet full-year customer nominations, as well as the earlier declared nomination reduction from a major customer.

Revenues per ton improved 12.9% year over year to $83.4. Cash production cost per ton increased 11.3% year over year to $58.8 in the quarter. The increase was mainly due to higher costs associated with maintenance and repairs, employee benefits and energy rates.

Asia Pacific Iron Ore: Sales volumes in the segment decreased 30.2% year over year to 2 million metric tonsprimarily due to lower production volumes.

Revenues per ton were $42.6, down 25.6% from the prior-year quarter. Cash production cost per ton was $44.6, up around 22.4% from the year-ago quarter. The increase was mainly due to higher mining costs.

Financial Position

Cleveland-Cliffs had $1 billion of cash and cash equivalents as of Dec 31, 2017 compared with $323 million as of Dec 31, 2016.

Long-term debt was at $2.3 billion as of Dec 31, 2017 compared with $2.2 billion as of Dec 31, 2016.

Capital expenditure was $77 million in the fourth quarter, compared with $23 million in the fourth quarter of 2016.

Outlook

For 2018, Cleveland-Cliffs projects sales and production volume for U.S. Iron Ore unit to be roughly 20 million long ton.

The company anticipates full-year selling, general and administrative (SG&A expenses to be around $115 million, of which roughly $20 million is non-cash.

Cleveland-Cliffs expects total 2018 capital expenditures to be around $385 million.

Price Performance

Cleveland-Cliffs' shares have moved up 5.4% in the last three months, underperforming the industry 's gain of 17.6%.

Zacks Rank & Key Picks

Cleveland-Cliffs carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Methanex Corporation MEOH , BASF SE BASFY and Kronos Worldwide Inc. KRO .

Methanex has an expected long-term earnings growth of 15% and sports a Zacks Rank #1 (Strong Buy). Shares of the company have rallied 31.5% in a year. You can see the complete list of today's Zacks #1 Rank stocks here.

BASF has an expected long-term earnings growth of 8.7% and flaunts a Zacks Rank #1. Shares of the company have moved up 23.5% in a year.

Kronos has an expected long-term earnings growth of 5% and carries a Zacks Rank #2 (Buy). Its shares have surged 127.2% over a year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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