EU and US could reach trade deal this weekend - Reuters
On Thursday, Jefferies analyst Christopher LaFemina downgraded Cleveland-Cliffs stock, trading on the New York Stock Exchange (NYSE:CLF), from Buy to Hold, adjusting the price target to $6 from the previous $10. The downgrade comes as the stock trades near its 52-week low of $5.93, having declined over 64% in the past year. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with technical indicators suggesting oversold conditions. The downgrade reflects concerns over the potential impact of a significant investment in U.S. Steel by Nippon and the construction of a new steel mill.
LaFemina’s assessment indicates that the proposed $14 billion investment directed toward U.S. Steel’s existing operations and the new mill construction could have a negative effect on major U.S. steel producers over most time horizons. The analyst pointed out that although protectionist policies might provide some support, the overall outlook for the steel industry in the United States has become less positive.
Cleveland-Cliffs, which has a high degree of leverage to changes in steel pricing, is particularly susceptible to shifts in the industry, according to Jefferies. The revised rating to Hold is intended to reflect the analyst’s view that the company’s prospects are now more uncertain given the potential increase in competition and market dynamics.
The report did not provide a specific timeline for the expected changes in the steel market, but the downgrade suggests that Jefferies anticipates the impact of Nippon’s investment to be felt over the medium to long term. Cleveland-Cliffs’ stock price may be influenced by these industry developments as investors digest the implications of increased investment and capacity in the sector. The company operates with a debt-to-equity ratio of 1.22, while analysts project negative earnings per share of -$2.20 for fiscal year 2025. InvestingPro subscribers can access 15+ additional key insights and detailed financial metrics to better understand the company’s positioning in this challenging environment.
Investors and market watchers will likely monitor the situation closely, considering the potential for shifts in the competitive landscape of the U.S. steel industry and the subsequent financial performance of companies like Cleveland-Cliffs. For comprehensive analysis of CLF and other steel industry stocks, investors can access detailed Pro Research Reports available exclusively on InvestingPro, offering expert insights and actionable intelligence for informed investment decisions.
In other recent news, Cleveland-Cliffs Inc. reported a first-quarter 2025 earnings miss, with an earnings per share of -$0.92, falling short of the expected -$0.67. The company’s revenue also came in below expectations at $4.63 billion, compared to the anticipated $4.68 billion. Following these results, GLJ Research downgraded Cleveland-Cliffs’ stock from Buy to Sell, citing increased debt levels and strategic missteps as primary concerns. The downgrade was accompanied by a revised price target of $3.91, reflecting a significant reassessment of the company’s prospects.
S&P Global Ratings revised Cleveland-Cliffs’ credit outlook to negative, while affirming its ’BB-’ rating. This revision is due to weaker earnings and cash flows, attributed to high debt levels and underperformance in noncore businesses. S&P anticipates the company’s leverage could remain high in the 8x-10x range in fiscal 2025, with potential improvement in 2026 as cost-saving measures take effect. Meanwhile, Cleveland-Cliffs shareholders approved executive pay and re-elected the board of directors, signaling continued shareholder support despite recent challenges.
The company is taking steps to return to profitability by idling non-core assets and considering asset sales to generate value. Cleveland-Cliffs plans to restart its Cleveland No. 6 blast furnace in 2026 to meet improving automotive steel demand. Additionally, new multiyear contracts with automotive manufacturers have been signed, albeit at lower prices, as the company works to regain lost market share.
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