Cliffs (CLF) Q4 Earnings, Revenues Beat Estimates

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Cliffs Natural Resources Inc. CLF reported net earnings (attributable to Cliffs shareholders) of $79.1 million or 34 cents per share in the fourth quarter of 2016, versus net loss (attributable to Cliffs shareholders) of $60.3 million or 39 cents per share logged in the year-ago quarter.

Adjusted earnings (excluding one-time items) for the reported quarter came in at 41 cents per share, beating the Zacks Consensus Estimate of earnings of 25 cents.

Sales for the quarter came in at $754 million, surging 58.4% from $476 million in the prior-year quarter. Sales also beat the Zacks Consensus Estimate of $688.5 million.

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Full-Year 2016

Cliffs recorded consolidated sales of $2.1 billion in 2016, up 5% from 2015. Net income attributable to the company’s shareholders in the year came in at $174 million or 87 cents per share, against a net loss of $788 million or $5.13 per share recorded in 2015.

Segment Performance

U.S. Iron Ore: U.S. Iron Ore pellet sales volume was 6.9 million long tons in the fourth quarter, compared with 4.5 million tons in the year-ago quarter. The rise was mainly due to improved steel market conditions increasing demand for pellets along with new customer arrangements in 2016.

Revenues per ton dipped 0.5% year over year to $73.86. Cash production cost per ton fell 8% year over year to $52.80 in the reported quarter as the quarter did not face any idle costs and supplies inventories write-down recorded in the previous year quarter. Moreover, asset retirement obligation adjustment also favorably impacted the segment.

Asia Pacific Iron Ore: Sales volumes in the segment inched up 0.7% year over year to almost 2.94 million metric tons. The increase was attributed to the size of the shipment vessels.

Revenues per ton were $57.30, up around 69.9% from $33.73 in the prior-year quarter. Cash production cost per ton was $36.40, up around 8% from the year-ago quarter. The increase was due to higher royalties and currency headwinds, along with higher mining and haulage costs.

Financial Position

Cliffs had $323.4 million of cash and cash equivalents as of Dec 31, 2016, compared with $285.2 million as of Dec 31, 2015. Long-term debt was at $2,175.1 million as of Dec 31, 2016, compared with $2,699.4 million as of Dec 31, 2015.

Capital expenditure was $23 million for the fourth quarter, in line with the fourth quarter of 2015. Depreciation, depletion and amortization were $27 million in the quarter.

Outlook

For 2017, Cliffs expects to generate net income of $510 million. The company projects its full-year selling, general and administrative (SG&A) expenses to be around $100 million, an $18 million decrease from 2016, of which $25 million is expected to be non-cash expenses.

Depreciation, depletion and amortization for 2017 are expected to be about $100 million. The company's interest expense for 2017 is anticipated to be roughly $175 million, compared to the $201 million recorded in 2016.

Cliffs expects its 2017 capital expenditures to be $105 million, including $40 million associated with the conclusion of the Mustang Project at the United Taconite mine.

U.S. Iron Ore Outlook

For 2017, Cliffs expects sales and production volume of 19 million long tons for the segment. Further, the company expects iron-ore cash cost of goods sold and operating expense to be in the range of $55−$60 per long ton.

Asia Pacific Iron Ore Outlook

For 2017, Cliffs projects sales and production volume of roughly 11.5 million tons for the Asia Pacific Iron Ore operation. Moreover, the company expects iron-ore cash cost of goods sold and operating expense to be in the range of $34−$39 per metric ton.

Cliffs Natural Resources Inc. Price, Consensus and EPS Surprise

 

Cliffs Natural Resources Inc. Price, Consensus and EPS Surprise | Cliffs Natural Resources Inc. Quote

Price Performance

Cliffs has outperformed the Zacks categorized Mining-Iron industry over the past three months. The company’s shares have gained around 28.1% over this period, compared with roughly 20.6% gain recorded by the industry.

 Zacks Rank & Other Stocks to Consider

Cliffs currently carries a Zacks Rank #2 (Buy).

Other favorably placed companies in the mining space are IAMGOLD Corp. IAG, Vale S.A. VALE and Teck Resources Ltd. TECK.

IAMGOLD has an expected long-term growth rate of 3% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vale holds a Zacks Rank #2 and has delivered an average positive surprise of 35.71% in the last reported quarter.

Teck Resources, also sporting a Zacks Rank #1, has an expected long-term growth rate of 10.65%.

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