CLF - Embedded Expectations Analysis - 2021 06 01
Cleveland-Cliffs Inc. (CLF:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with an 12.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about reducing their carbon footprint, rising commodity prices, and their ArcelorMittal acquisitionSpecifically, management may be concerned about the progress of their direct reduction initiatives, the impact of environmental laws and regulations on their business, and the development of decarbonization goals in the US market. Moreover, they may lack confidence in their ability to take advantage of current steel market conditions, and they may be overstating the potential of their ArcelorMittal USA acquisition as well as their ability to differentiate themselves from competitors. Furthermore, management may lack confidence in their ability to increase production flexibility and further reduce their carbon footprint and Scope 1 and Scope 2 greenhouse gas emissions. They may also have concerns about the impact of higher scrap, alloy, and natural gas prices on their cost structure and they may be downplaying concerns about blast furnace outages
Cleveland-Cliffs is an iron ore mining company. The company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The company is organized according to its differentiated products. The company has two segments: Mining and Pelletizing, which the company is a main producer of iron ore pellets, primarily selling production from its Mining and Pelletizing segment to integrated steel companies in the U.S. and Canada; and Metallics, which constructing a Hot Briquetted Iron (HBI) production plant, whereby HBI is an iron alternative to scrap that, when used as a feedstock, allows an Electric Arc Furnace to produces valuable grades of steel.
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