Cleveland Cliffs Reports 'Blow Out' Earnings

I am purposely using the same headline time after time this week - "(insert iron, coal or fertilizer name here) with Blow Out Earnings". It's been a heck of a performance for these names... Cleveland Cliffs (CLF) simply continues the train. I know, I know - I should be getting some restaurants because as gas drops to $3.25 they will roar back, and I'm looking backwards instead of forwards. Sorry, I just can't tear myself away from 100%+ growth, and punishing analysts estimates. Full report here.

Contra thesis? As China devolves into slowdown, and takes all the world with it, there will be little need for steel, or fertilizer, or coal. YET, I am to believe the U.S. is set to recover in early 2009. So we can have it both ways, correct? The global growth thesis is dead ... but the U.S. (which last I checked is the largest consumer of almost anything on this planet) rebounding (as the pundits tell me) won't be good for said consumables. Hmm... somehow the logic escapes me. Now if you are in the camp that the world is completely doomed and all countries will be devolving into recession - you have a point to be bearish. But too many people are having their cake and trying to steal our cake too.

• Cleveland-Cliffs Inc (CLF) Inc said on Wednesday its second-quarter rose sharply, helped by higher margins in its iron ore business. Cleveland-Cliffs said its net income rose to $270 million, or $2.57 per share, from $86 million, or 83 cents per share a year ago. Excluding adjustments to first-quarter sales related to the timing of international pricing settlements of iron ore, the company earned $2.21 per share, above the analyst consensus estimate of $1.99 per share, according to Reuters Estimates.
• Cleveland-Cliffs, which earlier this month announced plans to acquire Alpha Natural Resources Inc (ANR), said it is receiving positive feedback about the proposed deal from the majority of its largest shareholders. (except for 1, the big 1)
• Consolidated second-quarter revenue for the Cleveland, Ohio company rose 84 percent to a second-quarter record of $1 billion. The jump in revenue was the result of the strong market for iron ore and metallurgical coal.
• For 2008, Cleveland-Cliffs said it expects to realize an average per-ton price of $90 for North American iron ore in 2008, up from its previous estimate of $85 per ton.

So from the update we received in Thursday's full earnings report it appears everyone wants this deal to go through - both companies, most major shareholders - except for 1 party. [Jul 17: High Drama at the Cleveland Cliffs Corral]

Disclosure: Long Cleveland Cliffs, Alpha Natural Resources in fund; long Alpha Natural Resources in personal account.

Comments

[LJBinvestor:]

I agree totally, The major players are trying to chase after some perceived BIG recovery instead of sticking with the names that continue to deliver for the next 2-3 years. Most difficult to stomach but thats investing. They will come back to these plays eventually when their "quick gains" do not materialize.

2008 Aug 02 09:38 AM