Bank of America Securities analyst Lawson Winder maintained a Hold rating on Cleveland-Cliffs (CLF – Research Report) yesterday and set a price target of $20.00.
Lawson Winder has given his Hold rating due to a combination of factors that include the company’s solid fourth-quarter performance aligned with expectations, and a promising outlook for free cash flow generation. Despite Cleveland-Cliffs’ reported Q4’23 adjusted EBITDA matching Bank of America estimates and outperforming Bloomberg consensus, and the company’s net debt falling below its $3 billion target, Winder remains cautious. Cleveland-Cliffs’ commitment to aggressive share buybacks and cost reductions in 2024 indicate potential for improvement, yet the Hold rating reflects uncertainty in the market, particularly in U.S. hot-rolled coil pricing, which could affect future earnings.
The report also considers Cleveland-Cliffs’ strong position in the automotive market, with record shipments in the previous year and expectations for a slight increase next year. The company’s focus on reducing costs further, on top of the significant savings achieved in 2023, and its capital expenditure projections suggest a robust strategy. However, the emphasis on share buybacks over dividend reinstatement and the details required on automotive contract pricing and Q1’24 outlook maintain a cautious stance, leading to the Neutral position on the stock.
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Cleveland-Cliffs (CLF) Company Description:
Cleveland-Cliffs, Inc. is an iron ore mining company. It supplies iron ore pellets to the North American steel industry from mines and pellet plants located in Michigan and Minnesota. It operates through the following segments: Mining & Pelletizing and Metallics. The Mining & Pelletizing segment owns operational iron ore mines plus and indefinitely idled mine. The Metallics segment constructs an HBI production plant in Toledo, Ohio. The company was founded in 1847 and is headquartered in Cleveland, OH.
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