Group 1 - The Trump administration's steel tariffs have negatively impacted Cleveland-Cliffs, creating a demand gap that affected steel shipments and asset utilization [3] - A five-year steel slab supply contract, linked to the acquisition of ArcelorMittal USA, became unprofitable in its final year, representing about 10% of the company's sales volume [4] - The imposition of a 50% tariff on Brazilian steel by the Trump administration and a 25% tariff on steel and aluminum imports by Canada have further strained Cleveland-Cliffs' finances [5] Group 2 - Cleveland-Cliffs' revenue in 2025 decreased by approximately 3% year over year to $18.6 billion, with a net loss of $1.4 billion, a complete reversal from profitability in 2024 [7] - Steel shipment volumes increased by 4.1% year over year to 16.2 million tons, indicating some operational resilience despite financial losses [7] - The company anticipates recovery in 2026, citing improved business from automotive clients as production returns to the U.S. [7]

Company Overview - Cleveland-Cliffs Inc. is a leading iron ore mining company in the United States, specializing in producing iron ore pellets and serving as a major supplier to the North American steel industry [1] Financial Performance - CLF held its Q4 2025 earnings call, providing insights into its financial health and strategic plans, likely covering revenue, profit margins, and challenges faced during the quarter [3] - Currently, CLF's stock price is $12.16, marking a 17.48% decrease, with a trading range between $11.03 and $13.26 today [4] - Over the past year, the stock reached a high of $16.70 and a low of $5.63, reflecting significant volatility in its market performance [4] Market Position - Cleveland-Cliffs has a market capitalization of approximately $6.92 billion, indicating its size and market presence [5] - The company has a trading volume of 46.34 million shares on the NYSE, reflecting investor interest and market activity [5] Analyst Ratings - Citigroup maintained a Neutral rating for CLF, suggesting investors hold the stock, and raised its price target from $11 to $13, indicating cautious optimism about the company's future performance [2][6]

Core Viewpoint - Cleveland-Cliffs Inc. reported a mixed financial performance for the fourth quarter, with a notable EPS improvement but revenue falling short of expectations, indicating ongoing challenges in the steel industry [2][3][6]. Financial Performance - The company reported an earnings per share (EPS) of -$0.43, which was better than the Zacks Consensus Estimate of -$0.62, reflecting a positive surprise of 30.08% compared to a loss of $0.68 per share in the same quarter last year [2][6]. - Revenue for the quarter was approximately $4.31 billion, missing the estimated $4.59 billion by 6.66% and slightly lower than the $4.33 billion reported in the same quarter the previous year [3][6]. - Cleveland-Cliffs faced a GAAP net loss of $235 million, translating to a loss of $0.44 per diluted share, while the adjusted net loss was $0.43 per diluted share [4][6]. Liquidity and Financial Ratios - The company maintained a strong liquidity position with $3.3 billion available, indicating its capability to manage financial obligations effectively [4][6]. - The price-to-earnings (P/E) ratio was approximately -3.58, reflecting negative earnings, while the price-to-sales ratio was about 0.37, suggesting the stock is valued at 37 cents for every dollar of sales [5]. - The debt-to-equity ratio stood at 1.47, indicating a higher level of debt compared to equity, and a current ratio of 2.04 suggests strong liquidity, with current assets more than twice its current liabilities [5].

Guidance and Future Performance - The company's guidance is subject to significant uncertainties and may not materialize as expected, impacting actual operating results [176]. - Future performance estimates are based on assumptions that may change, affecting the reliability of the guidance provided [177]. Legal and Financial Risks - The company faces potential lawsuits and claims that could lead to significant expenditures, impacting financial condition and liquidity [180]. - The company may not have adequate insurance coverage for certain business risks, which could lead to material adverse effects on financial condition and cash flows [207]. - The company may incur significant costs related to cybersecurity threats and AI adoption, which could adversely affect operations and financial results [199]. Operational Challenges - Operating expenses may increase due to fluctuations in raw material and energy prices, which are influenced by various external factors [182]. - Transportation disruptions due to weather, strikes, or other factors could impair the ability to deliver products and maintain profitability [186]. - Capital project costs and timelines may exceed initial estimates, affecting production capabilities and financial performance [188]. - The company relies on critical equipment for operations, and failures may lead to production interruptions and increased capital expenditures [192]. - A significant interruption in supply from sole-source suppliers could result in substantial losses that may not be recoverable [193]. - Labor shortages for critical operational positions are anticipated, which could negatively affect production capabilities [225]. - A long-term shortage of skilled workers in heavy industry and specialized IT roles is predicted, impacting the ability to attract and retain employees [226]. Market and Economic Conditions - The majority of steel shipments are sold under contracts that do not allow full pass-through of increased costs, potentially lowering profit margins [184]. - The company faces potential overcapacity in the market, which may lead to further rationalization of manufacturing assets, including facility closures that could reduce production and revenues [201]. - The company is subject to risks associated with decarbonization initiatives, including potential carbon taxes and increased operational costs due to regulatory compliance [209]. - The company faces challenges in meeting decarbonization goals and maintaining a social license to operate amid reputational impacts from operating in a carbon-intensive industry [437]. Mining and Resource Management - The company relies on estimates of recoverable mineral reserves, which are subject to uncertainties that could adversely affect cost structure and gross margins [213]. - The company is evaluating its Michigan and Minnesota mining properties for rare earth mineralization, but the economic potential for extraction remains uncertain [214]. - There are risks associated with the economic viability of extracting rare earth minerals at mining properties, which could affect future operations [437]. Employee and Pension Obligations - The company recognized approximately $300 million in employee-related costs, asset impairments, and exit costs due to the permanent closure of three steelmaking facilities in 2025 [202]. - The company provides retiree benefits through defined benefit pension and OPEB plans, with certain plans being underfunded and subject to minimum cash contributions required by ERISA [222]. - Contribution amounts to multiemployer pension plans, such as the Steelworkers' Pension Trust, are determined during collective bargaining and could increase in future negotiations [223]. - The company may face withdrawal liability from multiemployer plans if the funded status declines or if it chooses to withdraw, which could adversely impact liquidity and cash flows [224]. - Unanticipated costs related to pension and OPEB obligations may arise from changes in plan asset values or required contributions [437]. Internal Controls and Cybersecurity - Cybersecurity threats pose risks to IT systems, which could disrupt business operations and lead to reputational harm and financial losses [196]. - Potential deficiencies in internal control over financial reporting could pose risks to the company's financial condition [437]. Social License and Reputation - The company must maintain its social license to operate, as reputational risks and environmental factors could adversely impact business growth and operational continuity [211].

Group 1 - Cleveland-Cliffs shares fell as much as 25% following a disappointing fourth-quarter report, despite a previous 50% increase over the past six months [1][2] - The company reported flat fourth-quarter sales, while analysts had anticipated a mid-single-digit increase, and the quarterly loss exceeded expectations [2] - CEO Lourenco Goncalves expressed optimism, highlighting improvements such as multi-year contracts with major automotive customers and reduced unit costs [3] Group 2 - Cleveland-Cliffs expects shipment volume to increase approximately 3.4% in 2026, aligning with positive comments from peer steelmaker Nucor regarding robust demand [3] - The company is pursuing a strategic partnership with South Korea's POSCO, which may influence investor sentiment moving forward [4]

Core Insights - Cleveland-Cliffs is reallocating melting capacity from low-margin slab orders to higher-margin flat-rolled products, anticipating continued demand for domestically produced slabs [1] - The company is experiencing improved market conditions entering 2026, driven by 50% Section 232 tariffs, melted-and-poured requirements, and new galvanizing capacity in the U.S. [2][5] - The expiration of the ArcelorMittal slab agreement is expected to significantly enhance earnings, with an estimated EBITDA benefit of around $500 million [6][11] Market Dynamics - Steel imports are negatively impacting the domestic market, creating a demand gap that has affected shipments and utilization through 2025 [2] - The company signed multi-year fixed-price contracts with major OEMs, which is expected to secure high-margin business and increase market share [4][7] - U.S. vehicle production fell for the third consecutive year in 2025, yet Cleveland-Cliffs is positioned to absorb incremental automotive demand without needing new plants [8] Financial Performance - Total shipments for Q4 2025 were reported at 3.8 million tons, with expectations to improve to about 4 million tons in Q1 2026 [13] - The realized price in Q4 2025 was $993 per net ton, down $40 per ton, but a $60 per ton improvement is anticipated in Q1 2026 [14] - The company has achieved three consecutive years of unit cost reductions, with a projected additional reduction of $10 per ton in 2026 [15] Capital Expenditure and Asset Management - Capital expenditures for 2025 were $561 million, the lowest on record, with projections of about $700 million for 2026 [16] - Cleveland-Cliffs has closed the sale of FPT Florida and is on track for $425 million in total proceeds from sales of idled properties [20] - The company is focusing on generating EBITDA and cash flow to pay down debt, with total liquidity at the end of 2025 reported at $3.3 billion [21] Strategic Initiatives - The company is actively pursuing a memorandum of understanding with POSCO, which is considered a strategic priority [18][19] - Cleveland-Cliffs has redirected Stelco's output to the Canadian market, which has faced pricing challenges but is expected to improve [17]

Cleveland-Cliffs Stock Drops on Earnings Miss. 2026 Should Be Better. - Barron'sSkip to Main ContentThis copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.# Cleveland-Cliffs Stock Plummets 24%. An Earnings Miss Isn't the Only Disappointment.By [Al Root]ShareResize---ReprintsIn t ...

Market Overview - US stocks experienced a positive turn on Monday, with the S&P 500 rising approximately 0.5% and the Nasdaq Composite gaining nearly 1%, while the Dow Jones Industrial Average remained above 50,000 for the first time [1] - Wall Street is currently debating the impact of AI disruptions on software companies, highlighted by a significant drop in shares of Monday.com, which fell as much as 22% due to disappointing revenue and profit guidance [2][12] Company Earnings and Performance - Cleveland-Cliffs stock dropped 19% after the steel producer's fourth-quarter revenue of $4.3 billion fell short of estimates of $4.5 billion, with a net loss per share of $0.44, which was better than the expected loss of $0.60 [5][6][7] - Monday.com reported adjusted earnings per share of $1.04, exceeding estimates of $0.92, but its first-quarter revenue guidance of $338 million to $340 million was below expectations of $342 million, leading to a 15% drop in stock price [19][20][21] - Kroger's stock surged over 8% after announcing the appointment of former Walmart executive Greg Foran as CEO, aiming to capture market share following a blocked acquisition [9][10] Economic Data and Trends - Investors are awaiting the delayed January jobs report from the Bureau of Labor Statistics, with a focus on potential signs of weakness in the labor market following a disappointing ADP payroll update [4] - Gold futures rose above $5,000 an ounce, while Bitcoin fell below $69,000 after experiencing significant volatility [3][26][27] Strategic Developments - STMicroelectronics announced a multiyear, multibillion-dollar deal with Amazon to supply chips for its data centers, resulting in an 8% increase in STMicroelectronics' stock [13][14][15] - QuantumScape's stock rose 14% following the launch of its "Eagle Line" battery production factory in San Jose [28]

Financial Data and Key Metrics Changes - Total shipments in Q4 were 3.8 million tons, slightly lower than Q3 due to seasonal impacts, with expectations for Q1 to improve back to 4 million tons [17] - Q4 price realization was $993 per net ton, down by around $40 per net ton, but a substantial improvement in realized prices is expected starting in Q1 2026, with an anticipated increase of approximately $60 per ton [18] - 2025 marked the third consecutive year of unit cost reductions, with a reduction of $40 per ton, and expectations for another $10 per ton decrease in 2026 [19] Business Line Data and Key Metrics Changes - The company has secured more business from automotive clients, which is expected to show throughout 2026 as OEMs reshore production back to the U.S. [4] - The cancellation of the slab contract with ArcelorMittal is projected to yield an EBITDA improvement of around $500 million by replacing lower-margin slabs with higher-margin products [28][29] - The company anticipates continued demand for domestically produced slabs due to melted and poured requirements [5] Market Data and Key Metrics Changes - The Canadian government has moved to restrict imported steel, creating positive momentum for the company's Canadian subsidiary, Stelco [4] - The spot steel price is currently at a two-year high, benefiting the company due to its cost structure and ability to generate its own power [6] - Vehicle production in the U.S. was down for three consecutive years, but a return to pre-COVID levels is expected due to policy-driven reshoring [7] Company Strategy and Development Direction - The company is focused on sustainable performance in an improved market, operating with a leaner footprint and a stronger order book [24] - The partnership with POSCO is a strategic priority, aimed at enhancing industrial cooperation and meeting U.S. trade requirements [14][52] - The company is positioned to benefit from the transition from aluminum to steel in automotive applications, leveraging existing technology and production capabilities [10][54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving business environment, with solid order books, rising prices, and declining costs [23] - The company is confident in its ability to absorb increased automotive demand with existing production capacity, avoiding the need for new plant construction [8] - Management highlighted the importance of the recent changes in the Canadian steel market and the positive impact on pricing and shipments [12][63] Other Important Information - The company achieved the lowest total recordable incident rate since becoming a steel producer, with a 43% improvement compared to 2021 [15] - Capital expenditures in 2025 were at a record low of $561 million, with projections for 2026 to be around $700 million [20] - Total liquidity at the end of 2025 was $3.3 billion, with a focus on generating EBITDA and cash flow [22] Q&A Session Summary Question: What benefit is expected from the cancellation of the slab contract? - The cancellation is projected to yield an EBITDA improvement of around $500 million by replacing lower-margin slabs with higher-margin products [28][29] Question: When should the improvement in EBITDA be expected? - The company is already selling the material in Q1, with more impact expected in Q2 and Q3 as cost flows through inventory [32] Question: How much open capacity is available for contracting? - The company has downstream capacity in every location, with significant potential to deploy more specialized steel products [40][41] Question: What is the outlook for Q1 regarding ASP and costs? - Shipments are expected to return to 4 million tons, with ASP projected to increase by $60 per ton in Q1, while costs may rise temporarily before normalizing [44][46] Question: How has Stelco performed and what is the outlook? - Stelco was disappointing in 2025 but is expected to contribute significantly in 2026 as market dynamics improve [60][62] Question: What is the status of asset sales? - The company is under contract to sell several idled properties, with total proceeds expected to reach $425 million, while larger asset sales are on hold pending POSCO negotiations [70][72]

Financial Data and Key Metrics Changes - Total shipments in Q4 2025 were 3.8 million tons, slightly lower than Q3 due to seasonal impacts, with expectations to improve to 4 million tons in Q1 2026 [17] - Q4 price realization was $993 per net ton, down by approximately $40 per net ton, but expected to improve by about $60 per ton in Q1 2026 [18][22] - Unit costs decreased by $40 per ton in 2025, marking the third consecutive year of reductions, with further expectations of a $10 per ton decrease in 2026 [19] Business Line Data and Key Metrics Changes - The company has shifted melting capacity from low-margin slabs to higher-margin flat-rolled products, anticipating continued demand for domestically produced slabs [5] - The automotive sector remains the core end market, with multi-year fixed-price contracts signed with major OEMs, expected to enhance market share and profitability in 2026 [7][9] Market Data and Key Metrics Changes - The spot steel price is at a two-year high, benefiting from Section 232 tariffs and increased domestic production [6] - Canadian pricing and shipments have improved following government restrictions on imported steel, positively impacting the Canadian subsidiary, Stelco [12] Company Strategy and Development Direction - The company is focused on leveraging existing production capacity without the need for new plants, positioning itself to benefit from the anticipated increase in domestic automotive production [8][10] - A strategic partnership with POSCO is a top priority, aimed at enhancing collaboration and meeting U.S. trade requirements [14][53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving business environment, citing a solid order book, rising prices, and declining costs as key factors for 2026 [22] - The company is well-positioned to capitalize on the return of vehicle production to pre-COVID levels, with expectations of significant throughput and profitability gains [23] Other Important Information - The company achieved a record low total recordable incident rate in 2025, reflecting a 43% improvement compared to 2021 [15] - Capital expenditures in 2025 were $561 million, with projections for 2026 to be around $700 million, reflecting normalized maintenance spending [20] Q&A Session Summary Question: Expected benefits from the cancellation of the slab contract - Management anticipates an EBITDA improvement of approximately $500 million from the cancellation of the slab contract, with benefits expected to materialize more significantly in Q2 2026 [27][31] Question: CapEx expectations beyond 2026 - CapEx is projected to be $700 million in 2026, increasing to $900 million in 2027 due to a blast furnace reline, then returning to $700 million in 2028 [34] Question: Open capacity and potential for contracting - The company has significant downstream capacity available, with the ability to produce specialized steel products, contingent on increased domestic automotive production [39][41] Question: Outlook for Q1 2026 - Shipments are expected to return to 4 million tons in Q1 2026, with ASP projected to increase by $60 per ton, driven by improved demand and pricing dynamics [44][46] Question: Impact of Stelco on earnings - Stelco's performance in 2025 was disappointing, but improvements are expected in 2026 as Canadian market dynamics change, contributing positively to overall results [60][64]