On Thursday, Cleveland-Cliffs Inc. (NYSE:CLF), a major North American steel and iron pellet producer, experienced a shift in stock rating. Argus has downgraded the company's stock from Buy to Hold. The adjustment reflects concerns over the company's earnings, which are currently in a down cycle influenced by pricing issues.
Cleveland-Cliffs, known for its vertical integration from mined raw materials to steelmaking and finishing, has been acknowledged as a well-run entity with a commendable industry track record. Despite this, the analyst pointed out that the current valuations to earnings seem reasonable when considering the company's historical performance compared to the broader market.
From a technical perspective, the analyst noted that Cleveland-Cliffs' shares have displayed a bearish pattern with lower highs and lower lows since March 2022. This trend has contributed to the decision to revise the rating and adopt a more cautious stance on the stock.
The firm indicated that a potential reevaluation of Cleveland-Cliffs' rating back to Buy could be considered if there is an improvement in steel pricing or if the company's share price drops toward the $14-$15 range for reasons not linked to fundamentals. The company's status as a key supplier to the automotive industry and its comprehensive operations from raw materials to finished products remain integral aspects of its business profile.
InvestingPro Insights
In response to the recent downgrade of Cleveland-Cliffs Inc. (NYSE:CLF) by Argus, it's important to consider various financial metrics and analyst insights that provide a broader picture of the company's status. According to real-time data from InvestingPro, Cleveland-Cliffs boasts a market capitalization of approximately $9.99 billion USD, with a Price/Earnings (P/E) Ratio of 25.55, adjusting to a more favorable 20.13 when considering the last twelve months as of Q4 2023. This adjustment suggests that the company's earnings power may be stronger than the current stock price indicates.
The company's revenue for the last twelve months as of Q4 2023 stands at $22.0 billion USD, despite a slight decrease of 4.32% in revenue growth. However, it's noteworthy that the company has experienced a quarterly revenue growth of 1.35% in Q4 2023, hinting at potential stabilization or improvement in its earnings trajectory.
InvestingPro Tips highlight that management has been actively engaged in share buybacks, signaling confidence in the company's value. Additionally, Cleveland-Cliffs is recognized for its high shareholder yield, which is a positive sign for investors looking for returns. With analysts predicting profitability this year and a strong return over the last three months—18.37%—there are indicators of potential upside for the company.
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