The book value is close to $15, and the stock is $11.65. While they are not making any profit, but the depreciation is worth $2, and the cash flow is slightly higher than that. They don’t pay dividend. Run by father-son duo. They are smart on rolling up (i.e., making M&A’s). Of course worldwide demand concerns are there and the materials are weak. Cycles turn and will be making profit. Something to keep an eye…
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If we have a recession CLF will be impacted. Tariffs will be a plus for domestic producers. If US Steel/Nippon Steel deal falls through is that plus or minus?
Nippon Steel promise to modernize US Steel plants would make US Steel stronger competitors–probably lower cost and force CLF to do likewise.
Yes and no. The steel manufacturers have recently (like last few months) gone through price decline and it at last bottomed. In fact in the last few weeks US steel manufacturers announced price raise. In the last 12 months they made no money.
Separately, CLF locks contract, thus price, for significant portion of its production. The price hike comes just before the contract renewal, which is good.
CLF wanted to buy US Steel. They offered cash and stock deal valuing US steel at $35 per share. They lost it to Nippon and still wanting to buy. Now that CLF share prices are down from $18 ~ $20 to $11.x, and $X is trading at $31, how much premium CLF can offer is a question, and whether CLF can acquire without paying that premium is a question. CLF has union support, FWIW.
CLF has already modernized its plants. CLF will modernize US Steel too. I am not worried about competitive pressure from another US manufacturer. You should be focused on China. Given Chinese economic challenges, and their propensity to dumping.
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Today Jim Lebenthal discussed CLF today in Halftime. Fiery exchange…
I agree most of Jim’s point, especially, the cycle is turning and CLF will be able manage and come out strong.
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I doubt that those contracts are take or pay. When the economy slows, their volume slows and so does profits.
