Cleveland-Cliffs (CLF) Provides Preliminary Results for Q1

Cleveland-Cliffs Inc. CLF has issued business updates amid the constantly evolving situation concerning the coronavirus and also announced preliminary results for first-quarter 2020.

The company expects revenues for the first quarter to be roughly between $345 million and $375 million. Adjusted EBITDA is projected in the range $15-$25 million. The company expects Mining and Pelletizing sales volume to be around 2.1 million long tons. Flat-rolled steel shipments are expected to be around 200,000 short tons, which only includes sales from Mar 13 to Mar 31. Pre-merger AK Steel flat-rolled steel shipments are projected at roughly 1.1 million short tons (from Jan 1 to Mar 12).

As of Mar 31, 2020, Cleveland-Cliffs had total liquidity of roughly $1 billion, including cash in hand worth around $200 million, ABL credit facility worth roughly $800 million along with borrowing base and letters of credit of around $1.8 billion and $200 million, respectively.  

Impact on Operations & Cost Cutting

Cleveland-Cliffs is undertaking certain measures to reduce costs until market conditions improve. This includes the temporarily idling of Dearborn Works, Precision Partners Facilities, around 65% of AK Tube production and construction of Toledo HBI. It has also extended outage at Butler Works and Mansfield Works and indefinitely idled AK Coal. Moreover, production at Northshore mine and Tilden mine is likely to be idled in mid-April.

Variable costs, which account for around 75% of the company’s total costs, will be mostly eliminated at the idled facilities. The company stated that it may also defer or reduce annual capital expenditures by around $200 million under extreme stress case. Further, the company intends to suspend future dividends.

Price Performance

Shares of Cleveland-Cliffs have plunged 62.3% in the past year compared with the industry’s 21.8% decline.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the basic materials space are Newmont Corporation NEM, Franco-Nevada Corporation FNV and Barrick Gold Corporation GOLD, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Newmont has an expected earnings growth rate of 83.3% for fiscal 2020. The company’s shares have surged 81.3% in the past year.

Franco-Nevada has an expected earnings growth rate of 15.9% for 2020. Its shares have returned 74.4% in the past year.    

Barrick has an expected earnings growth rate of 45.1% for 2020. The company’s shares have rallied 89.2% in the past year.

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