In a stunning move, shares of Cleveland-Cliffs (CLF 0.93%) popped 50.7% in the month of March, according to data provided by S&P Global Market Intelligence. The rally was even more remarkable given that the stock dropped by double digits in February. Clearly, the big announcement that the steelmaker made last month was enough to send the market into a tizzy, especially as it came close on the heels of expectations of President Biden unveiling his infrastructure plan.
Cleveland-Cliffs shares shot through the roof in the last couple of days in March after the company announced guidance for 2021. Although industry leader Nucor recently forecast a record first quarter backed by strong demand and price of steel, expectations for Cleveland-Cliffs were muted after the company's fourth-quarter numbers released in late February missed estimates.
Cleveland-Cliffs, however, stunned the market with its outlook, which it issued on March 30. The company projected:
- First-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $500 million.
- Second-quarter adjusted EBITDA of $1.2 billion.
- Full-year adjusted EBITDA of $3.5 billion.
Here's the thing: Cleveland-Cliffs earned adjusted EBITDA of only $353 million in 2020. While analysts were expecting a significant revival in the company's EBITDA this year, its outlook of $3.5 billion far exceeded even those estimates and sent the stock flying.
On top of an unexpectedly strong steel market, Cleveland-Cliffs should also start to see the benefits of its recent acquisition of ArcelorMittal's U.S. steel assets flowing through its top and bottom lines this year. It was a significant acquisition, one that has made Cleveland-Cliffs the largest flat-rolled steel and iron ore pellet (key raw material for steel) producer in North America.
Cleveland-Cliffs' upbeat outlook was a relief to investors disappointed by the company's last quarterly numbers and recent stock dilution. Moreover, the guidance comes at a time when expectations of a long-due infrastructure spending program becoming a reality are running high. Just days ago, President Biden unveiled his $2 trillion infrastructure program in detail, spurring frenzied buying activity in stocks poised to benefit from his infrastructure plan. Steel is essential to infrastructure, so that also explains the renewed interest in Cleveland-Cliffs.