Take a Closer Look at Cleveland-Cliffs Stock Before Earnings Drop

Cleveland-Cliffs Inc. (NYSE:CLF) is an Ohio-based company that specializes in the mining, beneficiation, and pelletizing of iron ore, as well as steelmaking, including stamping and tooling. It is the largest flat-rolled steel producer in North America. They are also the largest producer of iron ore pellets in North America. In 2020, Cleveland-Cliffs acquired two major steelmakers, AK Steel and ArcelorMittal USA. The company employs approximately 25,000 people across their mining, steel, and downstream manufacturing operations in the United States and Canada.

On March 30, Cleveland-Cliffs announced that it will report first-quarter earnings before the market opens on Thursday, April 22. It's been 50/50 at the earnings plate over the past year, with Cleveland-Cliffs beating expectations twice out of its four most recent reports.

For the first quarter of 2020, Cleveland-Cliffs missed analysts’ estimates by a margin of $0.03 and reported an EPS of -$0.19. For the second quarter of 2020, CLF decreased its EPS to -$0.28 and still managed to beat expectations by a significant margin of $0.22. For the third quarter of 2020, Cleveland-Cliffs had an increase in earnings and rose to -$0.03 per share. CLF also beat estimates by a margin of $0.06. In their most recent quarter Cleveland-Cliffs reported an EPS of $0.04 and missed expectations by a margin of $0.18.

CLF stock price has nearly quadrupled year-over-year and grown 446% after bottoming at a 52-week low of $3.30. Additionally, shares of Cleveland-Cliff stock have already increased 25.5% year-to-date.

From a fundamental perspective, Cleveland-Cliffs is about as much of a mixed bag as you can find. On the negative side, CLF lacks consistency and security on both its balance sheet and income statement. It currently have a massive $5.99 billion in debt, which far outweighs their $112 million cash balance. Cleveland-Cliffs has also lost well over $1.2 billion in net income since fiscal 2018 and reported $122 million in net losses for fiscal 2020.

On the positive side, however, the company grew revenues by an outstanding 169% in fiscal 2020 which took total revenues up to $5.35 billion. Cleveland-Cliffs stock also has an extraordinary forward price-earnings ratio of 4.79, even though the company isn’t profitable at the moment. However, Cleveland-Cliffs stock does have potential as speculative turn-around play for less risk-averse investors.

Regardless, shorts have been hitting the exits. Short interest dropped 14.8% during the past two reporting periods, but still accounts for a hefty 16% of the stock's total available float. At CLF's average pace of daily trading, it would take short sellers less than three days to buy back their bearish bets.

*Editor's Note: CLF revenue was up to $5.35 billion in 2020. The metric was originally written as $5.35 million.