Cleveland-Cliffs Misses Q4 Estimates, Stock Drops 7%

• The average price target for Cleveland-Cliffs Inc. (NYSE:CLF) has significantly decreased from $18.31 to $11, indicating a cautious outlook from analysts.
• Factors such as changes in demand, fluctuations in raw material prices, and broader economic conditions have contributed to this shift in sentiment.
• Despite a recent surge in CLF's stock price by 17.9%, the trend in earnings estimate revisions suggests limited potential for further price increases in the near term.

Cleveland-Cliffs Inc. (NYSE:CLF) is a leading flat-rolled steel producer in North America, providing a diverse array of steel products and raw materials. The company caters to various sectors, including automotive, infrastructure, manufacturing, and steel production. Despite its strong market presence, the consensus price target for CLF's stock has notably declined over the past year.

The average price target for CLF has dropped from $18.31 last year to $11 last month and last quarter. This significant decrease indicates a more cautious outlook from analysts regarding the company's future performance. Factors such as changes in demand for steel products, fluctuations in raw material prices, and broader economic conditions may have contributed to this shift in sentiment.

Analysts, as highlighted by Zacks, predict a decline in Cleveland-Cliffs' earnings in the upcoming financial report. This suggests that the company may not have the right combination of factors to exceed earnings expectations. Despite this, analyst Emily Chieng from Goldman Sachs has set a higher price target of $24 for CLF, indicating some optimism about the stock's potential.

Recently, CLF's stock price surged by 17.9% in a single trading session, with trading volume exceeding the average. However, the current trend in earnings estimate revisions suggests that further price increases may not occur in the near term. Investors should closely monitor upcoming earnings reports and strategic initiatives to better understand the stock's potential trajectory.

• Cleveland-Cliffs Inc. (NYSE:CLF) anticipates a quarterly loss due to reduced steel prices and weaker volumes.
• Revenue projections show a significant year-over-year decline, with a 15.6% decrease expected in the fourth quarter.
• The company's stock performance has suffered, dropping by 38.7% over the past year, reflecting broader industry challenges.

Cleveland-Cliffs Inc. (NYSE:CLF) is a major player in the mining and steel industry, primarily focusing on producing iron ore pellets and steel products. The company is set to release its fourth-quarter 2024 earnings on February 24, 2025. Wall Street anticipates a quarterly loss of $0.64 per share, with revenue projected at $4.46 billion.

Historically, CLF has exceeded earnings expectations, with an average surprise of 5.6% over the past four quarters. However, the upcoming quarter presents challenges due to reduced steel prices and weaker volumes. Analysts from Zacks Investment Research expect a quarterly loss of $0.58 per share, marking a significant year-over-year decline of 1060%.

Revenue projections for the fourth quarter are set at $4.31 billion, a 15.6% decrease from the previous year. This decline is reflected in the company's stock performance, which has dropped by 38.7% over the past year, compared to a 5.3% decline in the Zacks Mining – Miscellaneous industry. The consensus earnings per share (EPS) estimate has been revised downward by 22.9% over the past 30 days.

Cleveland-Cliffs' financial metrics highlight its current challenges. The company has a negative price-to-earnings (P/E) ratio of -11.50, indicating ongoing losses. The price-to-sales ratio is 0.28, and the enterprise value to sales ratio is 0.47, reflecting its valuation relative to revenue. Despite these challenges, the debt-to-equity ratio is 0.55, showing moderate debt levels, and the current ratio is 1.85, indicating a strong ability to cover short-term liabilities.

Director's Confidence in Cleveland-Cliffs Inc. (NYSE: CLF) Signals Positive Outlook

On Wednesday, May 1, 2024, Ron A. Bloom, a director at Cleveland-Cliffs Inc. (CLF), made a significant move in the stock market by purchasing 25,000 common shares of the company at a price of $16.995 each. This transaction not only increased Bloom's total holdings in Cleveland-Cliffs to 59,900 common shares but also signaled a strong vote of confidence in the company's future prospects. Such insider trading activities are closely monitored by investors as they often provide insights into the company's internal expectations and financial health. This particular acquisition was officially documented in a Form 4 filing with the SEC, ensuring transparency and compliance with regulatory standards.

Cleveland-Cliffs Inc. (NYSE: CLF), a leading producer of flat-rolled steel in North America, has recently taken a bold step to enhance market transparency by announcing its decision to publish a monthly "Cliffs Hot Rolled Market Price" for its customers. This initiative, as highlighted by a Business Wire article on April 26, 2024, aims to provide timely and reliable pricing information, reflecting the company's commitment to openness and its responsiveness to industry trends and customer feedback. By making this price available through a letter to all flat-rolled customers and on the company's website, Cleveland-Cliffs is setting a new standard in pricing transparency in the steel industry.

The financial metrics of Cleveland-Cliffs Inc. further underscore the company's solid standing in the market. With a price-to-earnings (P/E) ratio of approximately 21.08, investors are shown to have a willingness to pay a premium for the company's earnings, indicative of their confidence in its profitability. The price-to-sales (P/S) ratio of about 0.36 and an enterprise value-to-sales (EV/Sales) ratio of roughly 0.53 reflect a valuation that considers both the company's sales and its balance of debt and cash. Moreover, the enterprise value to operating cash flow (EV/OCF) ratio of approximately 4.72 highlights the market's valuation of the company's operating cash flow, a critical indicator of financial health.

The earnings yield of about 4.74% presents an attractive proposition to investors, offering a measure of the earnings generated for each dollar invested. Additionally, the debt-to-equity (D/E) ratio of around 0.51 indicates a balanced approach to financing, relying on a mix of debt and shareholder equity. The current ratio, sitting at approximately 1.90, demonstrates Cleveland-Cliffs' capability to cover its short-term liabilities with its short-term assets, further affirming its financial stability.

In summary, the insider trading activity by Ron A. Bloom, coupled with Cleveland-Cliffs Inc.'s strategic initiatives and solid financial metrics, paints a picture of a company that is not only thriving but also committed to maintaining transparency and fostering trust among its investors and customers. These developments are likely to bolster investor confidence and potentially influence the company's stock performance positively in the foreseeable future.

Cleveland-Cliffs (NYSE:CLF) reported disappointing first-quarter results, as the company was impacted by a buyers' strike from service centers during January and February. Shares of the company dropped more than 7% intra-day today following the announcement.

For Q1, the steelmaker posted adjusted earnings of $0.18 per share, a shift from a loss of $0.11 per share the previous year, on revenue of $5.20 billion, down from $5.30 billion the prior year. This fell short of expectations, which were set at $0.22 per share on revenue of $5.35 billion.

The company attributed its resilience to robust automotive production in the United States, which helped mitigate the effects of the temporary buyers' strike from service centers earlier in the year.

Steel product sales volumes decreased to 3.9 million net tons from 4.1 million a year ago in Q1, although the average selling price per ton increased to $1,175 from $1,128.

Cleveland-Cliffs reaffirmed its full-year guidance, expecting steel shipment volumes to reach 16.5 million net tons and forecasting a reduction in steel unit costs of approximately $30 per net ton year-over-year.

Morgan Stanley analysts changed Cleveland-Cliffs' (NYSE:CLF) rating from Overweight to Equalweight, adjusting the price target to $20 from $21.50.

The analysts explained the downgrade acknowledging Cleveland-Cliffs' potential for a strong free cash flow (FCF) yield in the upcoming years due to the absence of significant capital expenditure projects.

Additionally, a considerable portion of the company's annual contracts are fixed-price, which is expected to help maintain its overall pricing in the face of anticipated declines in spot steel prices in 2024.

However, Cleveland-Cliffs' significant exposure to the automotive sector, which is projected to underperform this year after a robust 2023, prompts concerns. Considering the stock's approximately 23% increase since the beginning of the fourth quarter of 2023, buoyed by successful price increases and a renewed focus on share buybacks by the management, the analysts believe the stock now lacks substantial upside potential relative to the new price target, leading to the adjustment in rating.

Morgan Stanley analysts changed Cleveland-Cliffs' (NYSE:CLF) rating from Overweight to Equalweight, adjusting the price target to $20 from $21.50.

The analysts explained the downgrade acknowledging Cleveland-Cliffs' potential for a strong free cash flow (FCF) yield in the upcoming years due to the absence of significant capital expenditure projects.

Additionally, a considerable portion of the company's annual contracts are fixed-price, which is expected to help maintain its overall pricing in the face of anticipated declines in spot steel prices in 2024.

However, Cleveland-Cliffs' significant exposure to the automotive sector, which is projected to underperform this year after a robust 2023, prompts concerns. Considering the stock's approximately 23% increase since the beginning of the fourth quarter of 2023, buoyed by successful price increases and a renewed focus on share buybacks by the management, the analysts believe the stock now lacks substantial upside potential relative to the new price target, leading to the adjustment in rating.