Shares of Cleveland-Cliffs (CLF) fell in after-hours trading after the steelmaker reported earnings for its third quarter of Fiscal Year 2024. Earnings per share came in at -$0.33, which was below analysts’ consensus estimate of -$0.31. Sales decreased by 18% year-over-year, with revenue hitting $4.6 billion. This also missed analysts’ expectations of $4.72 billion.
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For the quarter, the company reported steel shipments totaling 3.8 million net tons. It also posted an adjusted EBITDA of $124 million, which beat estimates of $113 million but was a year-over-year decrease from $624 million. These results don’t include the company’s Stelco acquisition, which closed last week and would have added $64 million to adjusted EBITDA.
As a result of the company’s significant drop in profitability, Cleveland-Cliffs did not buy back shares during the third quarter. This ends its streak of share repurchases that go back to at least Q3 2021, as shown in the image below. Interestingly, we can see that the amount repurchased varies significantly from quarter-to-quarter. This suggests that the firm is opportunistic with its buybacks, which makes sense since the steel industry tends to be very cyclical.
Capital Expenditures Outlook
For Fiscal Year 2024, Cleveland-Cliffs provided the following capital expenditures outlook:
- Capital expenditures between $600 and $650 million versus its previous range of $650 to $700 million.
- Fiscal Year 2025 capital expenditures of approximately $600 million
Although these expenditures have been lowered, CEO Lourenco Goncalves stated that the budget still accounts for strategic projects aimed at boosting annual EBITDA by over $600 million once completed. Additionally, he noted that lower coal costs are expected to provide a $70 million benefit compared to 2024 and anticipates that steel demand will rebound in early 2025.
Is CLF Stock a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CLF stock based on three Buys, three Holds, and zero Sells assigned in the past three months. After a 24% decline in its share price over the past three months, the average CLF price target of $16.05 per share implies 21.73% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
