Shares of steelmaker Cleveland-Cliffs (CLF 1.63%) -- once best known for iron and coal mining but now the proud owner of the U.S. steelmaking operations that used to belong to AK Steel and ArcelorMittal -- plummeted in Friday trading after the company announced fourth-quarter sales and earnings results that fell well short of expectations. As of 3:25 p.m. ET, Cleveland-Cliffs shares were down 10.1%.
Analysts had predicted that Cleveland-Cliffs would earn $2.12 per share on sales of more than $5.7 billion in the fourth quarter of 2021. But this morning, the company disabused them of that notion, reporting it earned only $1.69 per share on sales of only $5.3 billion, sparking the sell-off.
That's the bad news. The good news is that, other than disappointing Wall Street, Cleveland-Cliffs actually had a pretty great quarter, and a pretty great year.
For Q4, sales more than doubled to $5.3 billion, and the $1.69 per share profit that disappointed analysts was nonetheless a huge step up from the $0.14 per share the company earned in Q4 2020.
Likewise for the year, Cleveland-Cliffs nearly quadrupled its sales to $20.4 billion, and its earnings -- $5.36 -- easily eclipsed the $0.32 per share the company lost in 2020.
Commenting on the results in a statement, CEO Lourenco Goncalves said: "The results we achieved in 2021 are a clear demonstration of how powerful Cleveland-Cliffs has become, as our revenues grew more than ten times, from $2 billion in 2019 to over $20 billion in 2021. All this growth was profitable growth, generating $5.3 billion of Adjusted EBITDA and $3 billion of net income this past year." Furthermore, "Our strong cash flow generation allowed us to not only reduce our diluted share count by 10%, but also to bring our leverage down to a very healthy level of just 1x Adjusted EBITDA."
After a quarter like this one, seeing a sell-off such as we're seeing today, you might assume that Cleveland-Cliffs must have given some pretty lousy guidance to spook investors so much -- but that's not the case at all. To the contrary, while management didn't give specific guidance for 2022, it noted that steel prices are on the upswing now, and that it expects to average a selling price of $1,225 per ton on the steel it produces this year -- up 3% from last year.
Given all the above, I can only say that investors seem to be missing the forest for the trees here, and overreacting to an earnings miss in a quarter, and a year, that were simply fantastic for Cleveland-Cliffs.