Please ensure Javascript is enabled for purposes of website accessibility

Why Cleveland-Cliffs Stock Is on Fire Today

By Neha Chamaria – Oct 22, 2021 at 12:13PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The steel stock stunned the market with exceptionally strong third-quarter numbers.

What happened

Cleveland-Cliffs (CLF 1.60%) stock jumped Friday morning, popping 13.7% as of 10:30 a.m. EDT after the steel giant didn't just handily beat analysts' estimates but set itself up for even stronger growth in 2022.

So what

Cleveland-Cliffs delivered an exceptional third-quarter report today. Here are the numbers you must know:

  • Revenue surged 265% to $6 billion.
  • Net income jumped to $1.3 billion from only $2 million in the year-ago quarter.
  • Earnings per share shot up to $2.33 from a loss of $0.02 last year.

It was, in fact, a record quarter for the company, backed by a more than threefold jump in steel volumes on strong demand from the infrastructure, automotive, and manufacturing sectors. The astounding growth in its top and bottom lines crushed Wall Street estimates that called for revenue worth around $5.6 billion and earnings of $2.26 per share.

The solid beat, however, isn't the only reason why Cleveland-Cliffs shares shot up today.

A group of people rejoicing with screens around them displaying stock prices.

Image source: Getty Images.

CEO Lourenco Goncalves revealed the company had already renewed several annual fixed-price contracts with key customers at high prices, and therefore expects to realize even higher average prices in 2022. For perspective, Cleveland-Cliffs realized an average price of $1,334 per net ton of steel products in Q3, up 33% year over year.

Cleveland-Cliffs aims to use the incremental cash next year to fortify its balance sheet further. In the third quarter, the company retired all its outstanding preferred stocks, equating to an almost 10% share repurchase.

Now what

Steel stocks were plunging on worrisome developments in China barely a month ago. Investors who kept their cool, though, and focused on the long-term prospects of companies like Cleveland-Cliffs, must be happy to see the stock prove naysayers wrong. With the company also on track to becoming self-reliant by securing one of the strongest sources of scrap -- a key raw material for flat-rolled steel -- through its upcoming acquisition of Ferrous Processing and Trading Company, investors bullish about the steel markets especially under a Biden administration are bidding Cleveland-Cliffs shares high today.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.