Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.
Let's turn to Cliffs Natural Resources (NYSE: CLF) . The company has been hit hard by being at the epicenter of two suffering commodities: iron ore and metallurgical coal, both of which are essential components for steel production. Let's take an early look at what's been happening with Cliffs Natural Resources over the past quarter and what we're likely to see in its quarterly report on Wednesday.
Stats on Cliffs Natural Resources
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will Cliffs Natural Resources finally turn steel into profits? Analysts are batting 0-for-4 in guessing Cliffs' earnings over the past year, and they've gotten more conservative in recent months, reducing their earnings-per-share estimates by more than a dime for the quarter and by nearly $0.60 for the full 2013 year. Yet the shares haven't done badly, rising 2% since early November and recovering sharply from a big drop following its previous earnings report.
Cliffs gives steel companies just about everything they need for their production in one stop. With sources of iron ore and metallurgical coal that are conveniently located near major steel production centers in the U.S., including its ownership of iron ore-producing Mesabi Trust (NYSE: MSB) , Cliffs has a competitive advantage over global iron ore producers Vale (NYSE: VALE) and BHP Billiton.
The big question for Cliffs is whether steel demand will pick up. So far, recent news has been mixed on that score. AK Steel (NYSE: AKS) posted fourth-quarter results that weren't as bad as analysts had expected, pointing to a slow economic recovery in projecting that its results will be much better this year. Nucor (NYSE: NUE) has also seen some improvement in demand from its end user, with the automotive, energy, and heavy-equipment sectors contributing the biggest gains. But with weak economic growth around the world and cost overruns plaguing the mining industry, Cliffs hasn't yet seen the big bounce it needs to send share prices much higher.
In Cliffs' earnings report, one key to watch for is more information on the $1.4 billion in non-cash charges that the company said last month it would have to take. With $1 billion due to its acquisition of Consolidated Thompson two years ago and $365 million coming from the sale of its stake in Brazil's Amapa iron ore project, Cliffs has been putting off new project expansions. If that continues, it'll be hard for Cliffs to recover in the near future.
Learn more To get more in-depth information about Cliffs, be sure to read our premium report on the resources company today. Inside, you'll learn about several factors that are likely to remain advantageous for Cliffs' business, as well as big challenges on the way. For more details, click here now to check out The Motley Fool's brand-new premium report on the company.
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