Cleveland-Cliffs: Hold Rating with Financial Stability Amidst Uncertain Market Conditions

Bank of America Securities analyst Lawson Winder maintained a Hold rating on Cleveland-Cliffs (CLF – Research Report) yesterday and set a price target of $25.00.

Lawson Winder has given his Hold rating due to a combination of factors related to Cleveland-Cliffs’ financial performance and market outlook. Although the company’s Q1’24 adjusted EBITDA fell slightly short of expectations primarily due to lower volumes, they maintained their guidance for the year, suggesting stability in their business plan. Winder acknowledges the strong share buyback activity, with a significant 6% of shares repurchased, exceeding forecasts, and the announcement of a new $1.5 billion buyback program. These actions indicate confidence in the company’s cash generation capabilities and a commitment to returning value to shareholders. However, this positive aspect is tempered by a cautious stance on U.S. hot-rolled coil (HRC) pricing, which has seen a stalled mini-rally and faces potential downside risks due to relatively modest lead times and likely increased supply.

Furthermore, Lawson Winder’s analysis takes into account Cleveland-Cliffs’ operational focus areas. Despite a slight decline in direct auto sales, the company continues to aim for significant cost reductions and capital expenditure within a targeted range. The analyst also points out the importance of the upcoming discussions on the pace of future buybacks, potential mergers and acquisitions, and the updated net debt to EBITDA targets. Additionally, Winder highlights the relevance of the automotive annual contract pricing and volume adjustments, as well as the interest in details surrounding the company’s decarbonization strategy, which could potentially be funded by the U.S. Department of Energy. These factors combine to form a picture of a company with solid fundamentals but facing uncertain market conditions, leading to the neutral stance.

Based on the recent corporate insider activity of 60 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CLF in relation to earlier this year.

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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.