Cleveland-Cliffs Get Analyst Downgrade On Bullish Consensus, Higher Multiple Than Peer

  • GLJ Research believes that Cleveland-Cliffs Inc's CLF FY Q3 EBITDA will come in around $820 million vs. the consensus of $1.024 billion. The analyst downgraded it to Sell with a price target of $13.44.
  • Last week, CLF reported revenue/GAAP-EPS of $6.34 billion / $1.13 vs. the estimated $6.13 billion / $1.39.
  • However, it was the company's implied guidance for flattish volumes and operating expenses and average selling prices around $100/ ton lower QoQ in Q3.
  • With $820 million EBITDA and CLF's current enterprise value of $13.074 billion, GLJ arrives at an EV/EBITDA multiple of 4.0x, whereas, based on a similar calculation for United States Steel Corporation X EBITDA estimate of $1.093 billion, the implied EV/EBITDA multiple is 1.5x. 
  • Stated differently, CLF trades at a 2.6x premium to its closest peer.
  • Admittedly, while there is a risk that X tempers expectations on its forward earnings when it reports after the close this Thursday, with more in the U.S., 
  • GLJ believes US Steel is better positioned than CLF despite more exposure to the construction segment.
  • As such, overall, CLF is better positioned than money-losing "meme"/green stocks trading at an absurd multiple to sales.
  • Price Action: CLF shares are down 1.01% at $16.18 during the market session on the last check Wednesday.
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