Cleveland-Cliffs (NYSE:CLF) is a vertically integrated steel company. It produces everything from raw materials like iron ore, to finished steel products, including plate steel, electrical steel, tubular steel, stainless steel and carbon steel. It’s also the largest producer of flat-rolled steel in North America. That makes Cleveland Cliffs a big player in the automotive market, in addition to construction, appliances and many other industries. The $1 trillion bipartisan infrastructure bill is set to turbocharge demand for construction material — including steel. That’s good news for CLF stock, which is already up 68% so far in 2021.
After treading water for 5 years, CLF stock has been on fire for the past 12 months.
That’s especially true since the November election. Since President Biden’s election win was confirmed by Congress on November 7, 2020, CLF shares have posted an impressive 198% gain.
Q2 Earnings Show Cleveland-Cliffs on a Roll
When Cleveland-Cliffs reported its second-quarter 2020 earnings, the pandemic was in full effect. Lockdowns were in effect and plants were frequently shut down. Cars sat on the lots of auto dealerships that were often closed for in-person shopping. The company summed up its situation: “The second quarter was an unusual one, with the full impact of the COVID-19 pandemic hitting our clients. Our main concern then was preserving our liquidity during a time we were not able to ship steel to our clients in all markets we serve, and particularly in our main end-market, the automotive industry.”
At that time, CLF shares were trading in the $5 range.
What a difference a year makes.
On July 22, the company reported record Q2 results. Quarterly revenue hit $5 billion, compared to $1.1 billion the year before. CLF stock has been trading in the $25 range.
Anticipating An Infrastructure Spending Boost
While consumers have been dipping into their pockets (and spending their stimulus checks) on cars, appliances and other big ticket items that helped drive demand for steel, the big win is yet to come. The $1.2 trillion infrastructure bill features billions of dollars to be spent on repairing infrastructure like bridges, railways, the electrical grid and transit systems. Virtually all of these projects are going to require massive quantities of steel.
It’s probably no surprise that company is featured on this list of “7 Materials Stocks Ready to Supply the Infrastructure Boom.”
What About Debt?
One area that might have been causing some concern for investors is debt. At the end of the Q4 2019, Cleveland-Cliffs reported long-term debt of $2.11 billion. A year later, it had ballooned to $5.39 billion. At the end of its most recent quarter, the long-term debt situation had barely improved, standing at $5.37 billion.
However, CLF has a plan. In its Q2 earnings release, the company cited new contracts being negotiated with clients that will result in higher prices. This will allow Cleveland-Cliffs to tackle that debt going forward. “Ultimately, we are set for a monumental debt reduction during the back half of this year, and the achievement of zero net debt in 2022,” the company stated in its report.
If debt was keeping you from considering a CLF stock investment, it appears that factor will soon be eliminated.
The Bottom Line on CLF Stock
The company is already seeing blockbuster growth in demand for its steel products as consumer spending ramps up. Infrastructure projects will kick that into overdrive. CLF stock is also in blockbuster territory. Besides its big gains in 2021 and over the past 12 months, CLF also has an enviable A rating in Portfolio Grader.
If you check in with investment analysts, they see good things ahead for the company as well. Those polled by CNN Business have CLF stock rated as a consensus “Buy,” with a $27.18 median price target.
If you want a stock that is going to take advantage of big, post-pandemic trends including boosted consumer spending and the massive infrastructure bill, Cleveland-Cliffs is a pretty solid choice.
On the date of publication, Louis Navellier had a long position in CLF. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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