Cleveland-Cliffs Down 9.8% as Q4 Results Miss Estimates

Shares of Cleveland-Cliffs Inc. (CLF) fell 9.8% on Friday after the company reported lower-than-expected results for the fourth quarter of 2021. The iron ore mining company supplies iron ore pellets to the North American steel industry from mines and pellet plants located in Michigan and Minnesota.

Q4 Results

Earnings stood at $1.69 per share, which lagged analysts’ estimates of $2.11 per share. The figure compares favorably with $0.14 per share reported in the same quarter last year.

Total revenues of $5.3 billion missed the consensus estimate of $5.7 billion. The company had reported revenues of $2.3 billion last year. The upside can be attributed to a considerable rise in the volume of steel products.

Also, adjusted EBITDA stood at $1.5 billion, compared to $286 million in the fourth quarter of 2020. As of February 8, 2022, the company had total liquidity of nearly $2.6 billion.

Full-Year 2021 Performance

For 2021, the company delivered revenues of $20.4 billion, significantly up from the last year quarter’s revenues of $5.3 billion. Also, earnings of $5.36 improved from $0.32 reported in the prior-year.

Steel products sales volume surged about 5x times year-over-year to 15.9 net tons. Moreover, average net selling price per net ton of steel products rose 25.3% to $1,187.

Shares Repurchase Program

Alongside earnings, Cleveland-Cliffs’ announced that its board of directors have approved a new share repurchase program of up to $1 billion worth of shares. The buyback will be conducted via acquisitions in the open market or privately negotiated transactions. Also, it has no expiration date.

Outlook

The company projects average hot-rolled coil steel index price of $1,225 per net ton in 2022, based on the successful renewal of relevant fixed price sales contracts and current 2022 futures curve which implies an average price of $925 per net ton for the remainder of the year.

The Chairman, President and CEO of Cleveland-Cliffs, Lourenco Goncalves, said, “With demand on the rebound, particularly in automotive, 2022 is set to be another phenomenal year for profitability at Cleveland-Cliffs… As we look forward to delivering another stellar year in 2022 and with our limited needs for capex, we are now comfortable to implement shareholder-focused actions ahead of our original expectations.”

Stock Rating

The Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 2 Buys and 2 Holds. The Cleveland-Cliffs price target of $28.63 implies 51.3% upside potential.

Hedge Fund Trading Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Cleveland-Cliffs is currently Very Negative, as the cumulative change in holdings across all 7 hedge funds that were active in the last quarter was a decrease of 1 million shares.

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