Cliffs has surpassed the Zacks Consensus Estimate in 3 of the trailing 4 quarters, with an average positive surprise of 155.27%. Let’s see how things are shaping up for this announcement. Factors to Watch For Cliffs anticipates continued economic growth in the U.S. to support domestic steel production as well as the demand for steelmaking raw materials in 2015. Demand for steel in the U.S. is expected to be backed by strength in the automotive sector and a recovering housing market. This should have a positive impact on the upcoming results as well. Cliffs is boosting its mining and transportation capacity globally. Additionally, Cliffs will benefit from its pellet supply contracts with its U.S. iron ore customers, which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing. Cliffs has implemented a strategic capital allocation plan to ensure the optimum utilization of cash. Its focus remains on providing maximum return to the shareholders via dividend payouts and share buybacks, while maintaining its organic growth. In line with this strategy, the company’s Board has authorized it to repurchase shares worth up to $200 million. Cliffs is also focusing on cost management amid a weak pricing environment. The company has taken actions to reduce selling, general and administrative (SG&A) costs in 2015. Cliffs also remains focused on deleveraging its balance sheet, resulting in reduction in interest expenses. Factors like these are expected to support the fourth-quarter as well as full-year 2015 results of the company. During the fourth quarter, Cliffs also concluded the sale of its remaining coal business, Pinnacle Mine in West Virginia and Oak Grove Mine in Alabama, to Seneca Coal Resources, LLC. The sale of these mines signifies Cliffs’ exit from the coal business, and represents the company’s execution of its U.S. iron ore pellet-centric strategy that is environmentally compliant. Cliffs’ affiliates also completed the divestment of 60% ownership of the Decar nickel project, located in central British Columbia, to First Point Minerals Corp. for $4.75 million. However, excess capacity is still weighing on commodity prices. Cliffs has been significantly challenged by declining iron ore pricing. Seaborne iron ore prices remain under pressure, thereby weighing on the company’s revenues. Prices are expected to remain under pressure, partly due to increased supply. Earnings Whispers Our proven model shows that Cliffs is likely to beat earnings because it has the right combination of two key ingredients. Zacks ESP: Earnings ESP for Cliffs is 3.45%. This is because the Most Accurate estimate stands at a loss of 28 cents, while the Zacks Consensus Estimate is currently pegged at a loss of 29 cents. Zacks Rank: Cliffs currently has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank of #1 (Buy), 2 (Hold) and 3 have a significantly higher chance of beating earnings. Conversely, the Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement. The combination of Cliffs’ favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat. Stocks That Warrant a Look Here are some other companies in the basic materials sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: Franco-Nevada Corp. FNV has an earnings ESP of +8.33% and a Zacks Rank #3. Agrium Inc. AGU has an Earnings ESP of +4.86% and a Zacks Rank #3. Goldcorp Inc. GG has an Earnings ESP of +75% and a Zacks Rank #3. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AGRIUM INC (AGU): Free Stock Analysis Report GOLDCORP INC (GG): Free Stock Analysis Report CLIFFS NATURAL (CLF): Free Stock Analysis Report FRANCO NV CP (FNV): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
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