Cleveland-Cliffs shocked traders on Friday, July 20, 2018, when they reported earnings. The mining company reported EPS of $0.76 for the quarter, beating the consensus estimate of $0.56. Revenue also crushed it coming in at $714 million for the quarter versus the $653.75 million estimate. Cleveland-Cliffs’s revenue for the quarter was up a shocking 51.6% year-over-year.
President and CEO Lourenco Goncalves said, “Our second quarter is a definitive statement about the new Cliffs and our earnings power. After almost four years of consistent execution of a well-designed and thoroughly implemented strategy, our company has become a very powerful cash-generating enterprise.”
While the revenue chart is not great, notice that it supports the thesis that this is a turnaround stock.
I don’t like the setup though as you’d be flat-out chasing up here. It is better to wait for a pullback or at least some type of consolidation and range contraction before entering. I like the turnaround play catalyst though and so I’m adding to the long-term buy and hold Basic Materials Portfolio. Analysts do not all agree with my buy rating. Overall there are 2 sell ratings, 5 hold ratings, and 8 buy ratings on the stock. There’s a split between analysts but after Friday’s earnings report, I would not be surprised to see more analysts switching to a buy rating. My price target is $11 which represents 10.44% upside from the current price.
Disclosure: I do not have any position in CLF stock.