Nucor earnings beat by $0.08, revenue fell short of estimates
Tuesday, Cleveland-Cliffs Inc. (NYSE:CLF) shares maintained a Neutral rating and an $11.00 price target from Citi analysts, following the company’s announcement of operational changes. According to InvestingPro analysis, the stock appears undervalued at its current market capitalization of $4.66 billion, with significant potential for upside based on its Fair Value assessment. Cleveland-Cliffs declared the temporary shutdown of its Dearborn steel mill, which will be compensated for by the reactivation of the Cleveland C6 blast furnace. The Dearborn facility, with a capacity of approximately 2.2 million tons per annum (mtpa), generally outperforms the C6 furnace, which has a capacity of around 1.5 mtpa. The strategy reflects a shift towards optimizing capacity rather than reducing it.
The company’s objective is to enhance efficiency by operating the Cleveland site at full capacity with two blast furnaces, as opposed to running both the Cleveland and Dearborn mills at half capacity with one blast furnace each. In addition to the Dearborn mill’s closure, Cleveland-Cliffs also announced the temporary idling of two of its iron ore operations last week—Hibbing and Minorca—as part of a wider initiative to improve efficiency. These moves come as the company faces challenges with its gross profit margins, which InvestingPro data shows have been notably weak, while managing a significant debt burden.
The combined workforce reductions from these measures are expected to affect approximately 1,200 employees, which equates to around 3% of the company’s total workforce. Despite these layoffs, the full-time headcount was preserved at the C6 furnace. The recent decisions to idle operations and reduce staff, while unfortunate, may be viewed favorably by investors as Cleveland-Cliffs has faced challenges with its cost structure in the past.
Citi’s analysis suggests that these efforts are part of a broader push by Cleveland-Cliffs to streamline its operations and manage costs more effectively. The company’s decision to focus on running certain facilities at maximum capacity is intended to increase operational efficiency. These changes come as Cleveland-Cliffs seeks to improve its position in the steel industry, where cost control and efficiency are critical for competitiveness. InvestingPro data reveals the company maintains a healthy current ratio of 2.08, indicating strong short-term liquidity despite operational challenges. For deeper insights into Cleveland-Cliffs’ financial health and additional ProTips, investors can access the comprehensive Pro Research Report, which provides detailed analysis of the company’s performance metrics and future outlook.
In other recent news, Cleveland-Cliffs Inc. reported its fourth-quarter 2024 earnings, revealing a significant loss that was larger than anticipated. The company’s earnings per share (EPS) stood at -$0.68, which fell short of the forecasted -$0.46. Revenue also missed expectations, reaching $4.3 billion compared to the projected $4.54 billion. These results mark a challenging quarter for Cleveland-Cliffs, with adjusted EBITDA at -$81 million and total shipments amounting to 3.8 million tons.
Despite these setbacks, Cleveland-Cliffs is optimistic about 2025, expecting improvements driven by higher automotive volumes and potential price increases. The company is focusing on debt reduction and anticipates that its working capital will generate cash in the upcoming quarters. Analyst firms have noted the company’s commitment to maintaining its strategic initiatives and market position. Cleveland-Cliffs’ CEO, Lorenzo Gonzalez, expressed confidence in the company’s future, emphasizing its role in American manufacturing.
The company also highlighted its recent acquisition of Stelco (TSX:STLC), which it expects to contribute significant synergies by the end of 2025. Cleveland-Cliffs plans to use all its free cash flow for debt reduction until it reaches its target leverage ratio. The firm remains committed to strategic expansions and managing costs, with a focus on reducing unit steel costs and leveraging its integrated steel assets.
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