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Cleveland-Cliffs Stock Forecast: What To Consider As We Head Into 2022

Dec. 04, 2021 9:30 AM ETCleveland-Cliffs Inc. (CLF)NUE, TX427 Comments


  • The US steel industry is comparably clean relative to international peers. CLF uses a large amount of scrap for steel production.
  • Cleveland-Cliffs will be highly profitable this year, and most likely also in 2022. Beyond that, profitability will likely not be maintained at the current, elevated level.
  • CLF is not expensive and could have significant upside potential, but the industry is out of favor right now.
  • Looking for a helping hand in the market? Members of Cash Flow Kingdom get exclusive ideas and guidance to navigate any climate. Learn More »

Rollen aus Metallblech. Zink-, Aluminium- oder Stahlblechwalzen im Werk.

Bet_Noire/iStock via Getty Images

Article Thesis

On the back of a recovering economy and a building boom, Cleveland-Cliffs, Inc (NYSE:CLF) and its peers from the steel industry in North America have had a strong year. Shares have performed well over

Is This an Income Stream Which Induces Fear?

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This article was written by

Jonathan Weber profile picture

Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He has been sharing his research on Seeking Alpha since 2014. Jonathan’s primary focus is on value and income stocks but he covers growth occasionally.

He is a contributing author for the investing group Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (427)

Yo, Ed profile picture
Looks like the rotation is back to Growth. That didn't take long Oil and Steel off today. Damn
TommyIrish profile picture
Thanks, interesting article.

Yes, stock looks cheap.

Looks good a nibble at $21 IMO.
@TommyIrish how about at $16 cheap? All the politicians have dumped this one b4 drop - insiders!
TommyIrish profile picture

Yeah, my CLF is a long-term holding.

Not buying ANYTHING at the moment.

At least my put portfolio are doing OK…
BlackNapkin123 profile picture
CLF was named one of the top 7 Meme stocks for 2022… apple.news/...
@BlackNapkin123 Interested. Thanks for sharing. You there @Simeroth1 ?
Yo, Ed profile picture
@Cassidy Run Sime is down at the bankruptcy court after all those short positions. LOL
Jon Najarian just now mentioned he’s positive on CLF (onboard with Jim Lebenthal) - CNBC halftime report
On CNBC: JimmLebenthal Names Cleveland-Cliffs As Top Pick For 2022
Benzinga Newsdesk , Benzinga Staff Writer
December 28, 2021 12:53pm
from a yahoo post

From CFRA dated 12/17/2021. Merry Christmas to all.

* Our Strong Buy opinion is supported by CLF’s
competitive advantage producing iron ore
pellets and steel in North America. CLF has a
strong focus on maximizing return on invested
capital and throughout 2021 has focused on
paying down debt to continue to improve its
balance sheet. We think CLF has been proactive
with its HBI facility, a project that is generating
strong returns on investment. CLF’s acquisition
of AKS and AM USA both are accretive to EPS
and FCF per share in 2021 and beyond. These
two acquisitions strengthen CLF’s competitive
position in several markets.

* Risks to our outlook include worse-thanexpected economic conditions in North America
(especially automotive OEM build rates or
nonresidential construction), lower steel prices,
and higher input costs.

* Our 12-month target of $43 values CLF shares
at an EV/EBITDA of 4.0x our ‘22 EBITDA
estimate. We think the risk/reward profile is very
compelling, given its strong long-term
fundamentals, top-tier management team (with
a focus on capital discipline), and a strong
balance sheet. Unlike its peers, CLF is more
insulated from the potential impact of lower
steel prices, given 45% of its contracts are
annual fixed-price contracts.
@blue_angels "Unlike its peers, CLF is more
insulated from the potential impact of lower
steel prices, given 45% of its contracts are
annual fixed-price contracts."

Insulated for a year. Really need steel to find its floor around $1100 or higher.
Glad IR told them the same thing they told me on the 45% of annual contracts. :)
Yo, Ed profile picture
@blue_angels It prices come down its going to suck for eveybody.
@Yo, Ed Merry Christmas.
Long time fan of CLF buying when news of the Toledo factory was announced as a cash flow slot machine, but then again I like turn around situations. CLF will tend to rise into earnings, then fall back after earnings like so many stocks. The fact CLF is absolutely a boring "value" stock with tremendous competitive moat (due to acquisitions), is lost on the momentum crowd chasing the latest Cathie Woods stocks...firms which are not making money. Agree CLF is a "hold." However, if you are considering investing in CLF, read a few transcripts of earnings release. The CEO is both effective and colorful. IF value ever becomes popular, CLF will thrive. For now, it just plods along. I am wondering if Wall Street analyst will react to CLF paying off the majority of its debt in 2022, as promised by the CEO.
@TKozamuki I think to truly get a feel for CLF potential investors should listen to the conference calls instead of reading. This is what made me invest in CLF. I invested after listening to a few quarters of conference calls back when CLF was only an iron ore company.
PT Larry profile picture
@PEAK AUTOS Noticed that HCR is quoted around $1400, down from $1600 of last week. Was this expected, since the steel companies are all higher?
@PT Larry I dont think it falling this fast was expected. July is below $1100, which I thought could be a floor for '22. So this could be why the steel stocks are not performing very well.

That said $CLF is a low cost producer and at $1100 or higher should do extremely well in profits and cash-flow. But the scenario of steel declining seems to have accelerated faster than expected. The floor is the question.

Given these prices, the guide for Q1 should give us some light into impact, but Q2 will be the qtr that really does that. I say this as annual contracts are 45% of business and qtrly contracts are 20%-25% of business and monthly contracts are 20%-25%...spot is 10%. So almost 75% of the business is already priced via contracts for Q1. For Q2 only the 45% is priced and thus we will likely see ASP (average selling price) decrease significantly in Q2 from Q4 '21.
Yo, Ed profile picture
I suspect some early profit taking tomorrow, then another rally.
Just guessing based on past history. Hopefully, we will rally out of the Gate.
HunterKiller89 profile picture
@Yo, Ed I suspect the market reverses from whichever direction it starts out in the pre market within a couple hours of market open. Just guessing for the hell of it :P
Yo, Ed profile picture
@Yo, Ed Glad I was wrong
Seeking mispricings profile picture
I knew I shouldn't have went long when i saw all the positive comments here.
@A........a Patience and accumulate your position over time. You will be very happy come Christmas time 2022. I have held a core position for a couple of years and also trade CLF all the time as this little stock moves almost on a daily basis.
@A........a Nice insider buying around this price -- almost like they know they are going to outperform?
Yo, Ed profile picture
@Miwicz Where did you see insider buying? I usually get a notice from investor relations
PT Larry profile picture
Eighteen hundred (1800) lbs. of steel goes into every new car.
Yo, Ed profile picture
@PT Larry Unfortunately, cars aren't selling! But they will be soon. Backlog of Inventory to get through, but when chips become available, they will be selling like hot cakes.
@Yo, Ed CLF had already guided for mill downtime in Q4. And CLF called the convertible notes, so don’t expect any positive guidance for Q4. 2022 should be ridiculously good for CLF though - retire most of the debt, obtain IG rating, and move forward.
@Yo, Ed Anybody know how many partially (90%) complete autos are sitting, waiting for chips to complete? Hopefully not too many.
PT Larry profile picture
Today, I did what any blue blooded CLF shareholder would do, I bought more!
Yo, Ed profile picture
@PT Larry Good call Larry, I did the same.
Yo, Ed profile picture
Who's buying today?
Krypto profile picture
@Yo, Ed I bought more just now at 19.25 but just 2000 shares...
Krypto profile picture
@Yo, Ed Also sold 30 $19 puts for the 23rd.
HunterKiller89 profile picture
@Yo, Ed bought a little, but bought back the sold end of one of my my bull call spreads too.
Yo, Ed profile picture
Santa giveth and Santa taketh away. It seems like Omicron is the trending gift of the year.
@Yo, Ed Santa didn’t show up
Yo, Ed profile picture
@kevn1111 I hear you. I just happen to clear a large position in CLF. Just lucky timing. So, it gaveth at that time. Started buying back in on Friday, which was too early, apparently. At these levels, I am rebuilding my position in CLFs. Hope it isn't too early.

I am struggling to hold my core position at this point. Being forced to trade. When we get closer to Q4, I look forward to buy and hold.
RickJensen profile picture
@Yo, Ed
Wait until the world figures out that Omicron is the best thing that could happen. People are flat out being lied to and when they find out, it should make a recovery much faster. It's the last attempt to come up with a reason why people can't monitor the vote count.
Alfgolf profile picture
It nerves....
CapVandal profile picture
the company’s steel operations is expected to be higher than third quarter results setting a new quarterly record, driven by strong underlying steel demand and metal spread expansion across the platform, more than offsetting seasonally lower steel shipments


It wasn't much of an upward revision, but it is hard to believe that they haven't essentially closed their books for the year.

So NUE confirmed for core steel business, but a few pennies lower on DRI sales. X is a bit lowern following a record EBITDA quarter margin for the industry high mid 30%. on Slovakia closings. And STLD is good.

Core US Steel industry will have a great quarter.
Yo, Ed profile picture
@CapVandal Slovakia closing? Really?
PT Larry profile picture
@CapVandal Thanks for the link.
Expect the roller coaster to continue:

1732 ET - United States Steel forecasts 4Q adjusted EBITDA of about $1.65B, as higher prices for steel are offset by customers' cautious seasonal buying patterns and higher expenses for raw materials and energy. The profit guidance is well below analysts' expectation of $2.12B of EBITDA, according to Factset. US Steel says EBITDA margins for its flat-rolled business and Big River Steel operation will be similar to the 3Q, but expects lower margins from its European business because of lower steel prices and a 60-day outage at a blast furnace at its mill in Slovakia. In after hours trading, shares are down 3.9% at $22.52.
To paraphrase Clint Eastwood, that's all very cozy to see CLF up when the whole market is down. ;)
Yo, Ed profile picture
@Hurray I think the transition from growth to value is slowly starting to happen. Or in CLF's case (value/Growth).
@Yo, Ed Actually, today it was primarily due to STLD upping the consensus.

*Steel Dynamics Sees Q4 Adj. EPS $5.69-$5.73 vs $5.62 Est.
Read all the comments and I am sorry to be such a bull on CLF but I just cannot help myself. I do not know why little CLF stock price moves so much from day to day but it has made me some nice profits last couple of years and I have a large core position that I have no intention of selling for the following reasons. 1) We have a great CEO running an iron ore company that purchased 2 steel companies at the perfect time. An incredible move and recently purchased a scrap company that I think will also turn out very well. 2) Market has a record year for insider sells and our insiders are buying and this after CLF stock price is up huge. 3) Economy looks strong and jobs are plentiful. 4) Every week I read about a different company building new plants in America. Latest is Rivian building 5 billion plant in Georgia. Lots and lots of steel. 5) Many new plants are related to EV autos so once constructed a great customer for CLF. As long as chip shortages improve more autos will be built in USA in 2022 and 2023 than 2021. 6) New tech EVs and autonomous usually spurs sales growth but even if total auto sales remain the same good chance a higher percentage of them will be made in the USA with CLF steel. 7) Let’s not get political but let’s understand politics and it’s impact on our investment in CLF. We are all pro clean air and CLF is clean steel and Union worker steel. Washington will eat this up. ICE vehicles are the new cigarettes and Washington wants them built in the USA with proposed $7,500 credit with possible $12,500 credit if built by union workers. This bodes well for steel tariffs and import quotas and domestic auto production using CLF steel. I am sure I forgot a few more reasons but I also do not foresee new steel companies being started up in Silicon Valley or anywhere else. Once again sorry to be such an enormous bull and all investments have risks but it is not like CLF trades at 15 X sales or 100 X earnings. Merry Christmas to all with health and prosperity to all for the new year.
@PEAK AUTOS sorry I meant to say Washington wants EVs to replace ICE vehicles built in the USA.
PT Larry profile picture
@PEAK AUTOS Also have taken a seriously bullish stance on CLF. It is in second position in my port, second to EOG.

The outlook for steel is brightened by auto and appliance demand expansion and not just EVs. The pent up demand for new vehicles is high.

I don’t look for the PE ratio to expand more than to around 6-7. The company itself will be seen by the markets as having repositioned within the industry.
Yo, Ed profile picture
@PEAK AUTOS Ahhh. I'm going to sit back and have a PBR. Come Q4, I'm going to upgrade to some high end Champagne!
Yo, Ed profile picture
Steel Dynamics jumps 5% on guiding Q4 EPS above consensus
@Yo, Ed boom! CLF should jump 20%, ha. I dont think we will hear from LG as he was burned by the analysts before when he provided updated guidance a couple times one qtr. Yes one qtr he kept raising the guide. Analysts went even further and despite CLF hitting their guide the analyst community called it a miss because they were idiots and did not listen to LG. So he said "no more updating guide during the quarter".

So I would not expect anything till the earnings release and then hopefully we get a '22 guide and at a minimum a H1 '22 guide.
PT Larry profile picture
@Yo, Ed Yesterday, it seemed the world was coming apart and just look at today. Commodities are back, really never left.

STLD guidance is a huge positive for all steel.
Yo, Ed profile picture
@kevn1111 Well LG, doesn't have to give guidance. STLD just did that for us. Thinking Similar! Anyway, it probably helped.
It has been a good 2 days. Got FED behind us, now someone needs to quell the Covid talk.
Cramer on Nucor:
@Hurray Thanks for the link. I think LG has already given his guidance, along with many in the C suite and boardroom, on upcoming earnings and corresponding share price value.

What a crazy day! I had an appointment at market opening and so decided to put the Koci bid in for 150 trades at $19.91. Once I learn of the price drop, I hurried back to work Bought 200 more at $19.27, 200 more at $18.95, 250 more at $18.86, and 100 more near the close just below the LG price of $19.75.

It appears that CLF will have to “prove it“ quarter after quarter. I believe they’ll do so and the great value that presented itself today will be realized.
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