Cleveland-Cliffs cut at J.P. Morgan on weakening fundamentals, rising capex needs
Cleveland-Cliffs (CLF) stock plunges to 8-month low after J.P. Morgan downgrades, reflecting lower steel price forecast, growing capex needs through 2028 and lack of near-term growth. Cleveland-Cliffs (NYSE:CLF) has been downgraded to Neutral from Overweight by J.P. Morgan due to weakening fundamentals, rising capex needs, and a lack of near-term growth. The company's shares fell 4.8% in trading, marking its lowest in nearly eight months. JPMorgan's Bill Peterson remains positive about the company's execution, but sees downside risk to Q2 estimates and is wary of further debt-funded buybacks. He also noted that while buybacks are likely to be lighter, investors may prefer cash accumulation for potential M&A. Morgan Stanley also lowered its estimates for mark-to-market steel and scrap prices for Q2 and H2 due to a faster than expected drop in prices, led by a slowdown in demand.
Publicados : 10 meses atrás por SA News Editor, Carl Surran no Finance
Cleveland-Cliffs (NYSE:CLF) -4.8% in Tuesday's trading to its lowest in nearly eight months after J.P. Morgan downgrades shares to Neutral from Overweight with a $17 price target, cut from $24, reflecting a lower price forecast for value-add and plate, as well as growing capital spending needs through 2028 and a lack of near-term growth, unlike most steelmaking peers.
JPM's Bill Peterson says he continues to believe Cliffs (CLF) is executing well in a challenging environment and has attractive opportunities over the mid- and longer-term, but he sees downside risk to Q2 estimates and is wary of how investors may respond to further debt-funded buybacks.
Buybacks remain a top near-term priority, but "likely will be lighter moving forward following Q1's catch-up and investors appear to prefer cash accumulation for potential M&A," according to the analyst.
"With forward pricing likely to come in weaker than previously expected, coupled with higher capex in the coming years, free cash flow and shareholder returns will likely be less attractive than our previous expectations," Peterson writes, driving his downgrade.
In a separate note, Morgan Stanley lowered its estimates for mark-to-market steel and scrap prices for Q2 and H2 following a faster than expected drop in prices, led by a slowdown in demand.
Other steel stocks also trade lower, perhaps pulled down by the Cleveland-Cliffs (CLF) downgrade; ArcelorMittal (MT) -2.8%, US Steel (X) -2.3%, Steel Dynamics (STLD) -1.9%, Nucor (NUE) -1.3%.
Tópicos: Markets