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Cleveland-Cliffs, Tariffs and Stock Buybacks
The steel maker plows tariff-padded profits into buying its own shares.
Cleveland-Cliffs’s stock jumped 7% Tuesday after CEO Lourenco Goncalves announced plans to “put a stronger focus on aggressive share buybacks.” He says it’s a good time to buy the company’s shares, which he thinks are undervalued despite a rich price-earnings ratio of 26.
Perhaps the CEO doesn’t believe investors are properly valuing tariffs and the subsidies for domestic steel in the 2021 infrastructure bill and Inflation Reduction Act. Federally funded public works must be built with U.S. steel, and green energy developers get a 10% bonus tax credit if they use domestic steel.
President Biden has kept the 25% Trump tariff on foreign steel. And Cleveland-Cliffs, the United Steelworkers union and Mr. Brown last year lobbied for more tariffs on tin-mill steel. In September the Commerce Department slapped duties of 122.5% on Chinese tin and lower margins on imports from Germany (6.9%), Canada (5.3%) and South Korea (2.7%).
https://www.wsj.com/articles/cleveland-cliffs-stock-buybacks-tariffs-steel-lourenco-goncalves-sherrod-brown-9da2377f?mod=hp_opin_pos_3#cxrecs_s
Yes....the scoffed at outlier appears to have been on target. Kudos, and they will have a slower more thoughtful rollout of their EV offering while selling their ICE and hybrid lineup. Well run company.
BYD is building a large selection of EV's and hybrids aimed at all the segments of the market. I think your general observation on size is accurate. Size and weight equate to cost; smaller, lighter = cheaper to build. So yes, we will probably see cars in all classes literally downsized to keep cost and sale price as low as possible. The Seagull has been a huge hit for BYD based on affordability, it definitely fills a market segment looking for a low cost alternative.
Bayer hit with new $2.25B Roundup verdict:
https://www.wsj.com/finance/bayer-shares-fall-after-jury-orders-2-25-billion-in-damages-in-roundup-case-6de45fdc
As I've said on numerous occasions, I don't understand how a company can continue to sell a product where it has (purportedly) settled litigation with plaintiffs on onerous terms.
Toyota sold 11.2M vehicles in 2023, +7% YoY and an all-time high:
https://www.wsj.com/business/autos/toyota-group-global-sales-rose-to-a-record-in-2023-a929a97a
They must be doing something right, LOL.
Cars in my 76 year lifetime have really been downsized. I look at a Toyota Rav 4 parked in my condo garage as a big car. When they came out, they seemed small compared to the full sized SUV's. Heck, my 76 Pontiac Grand Prix had a front end than was almost as long as the cab and trunk combined. With the added weight of SUV's, my guess they will get smaller and BYD's seem smaller. Can I visualize cars in the futures not much bigger than golf carts?
BYD Seagull>>>>>>>
https://www.bing.com/videos/riverview/relatedvideo?q=BYD%20cars%20are%20smaller&mid=26B29B9A2B2FD6FA5E9026B29B9A2B2FD6FA5E90&ajaxhist=0
CLF is +5% as I’m typing, a reversal from the slight selloff in yesterday’s AH session. Investors apparently liked the CC this morning.
Re: Hydrogen as a blast-furnace reductant
In due course, CLF will charge a premium for steel manufactured using hydrogen as a reductant in its blast furnaces. This hydrogen-based premium will be in addition to the existing $40/ton surcharge some of CLF’s existing customers pay for CLF’s steel that is manufactured using HBI and hence can be labeled as “low carbon.”
CLF 4Q23 CC notes:
In 2024, CLF expects to use free cash flow approximately 50% for debt reduction and 50% for share buybacks (subject to market prices). This is a big change from the 2023 allocation, which was roughly 85% for debt reduction and 15% for share buybacks.
CLF expects the US index price of HRC to be relatively stable in 2024 (unlike 2023). For the fixed-price contracts up for renewal in 2024, CLF expects to realize an ASP for HRC in the range of $1,000-1,150/ton.
Toyota, CLF’s largest individual customer, has its fixed-price contract up for renewal on 4/1/24.
Yes, I noticed that.
After reading Nucor's release it's hard to believe these two companies are in the same marketplace. Cliff's can print every metric on a financial statement but somehow hides the real number. -EPS
CLF reports 4Q23 results—issues 2024 guidance:
https://www.clevelandcliffs.com/investors/news-events/press-releases/detail/621/cleveland-cliffs-reports-full-year-and-fourth-quarter-2023
cloudy skies....trade war brewing?
XOM, CVX writing off $5B of California assets due to political climate:
https://finance.yahoo.com/news/analysis-california-big-oil-splitting-184130187.html
Each company is expected to take a non-cash charge of approximately $2.5B when reporting 4Q23 results this week.
Indeed they are and they will be good for.....BYD is beginning to look attractive as the EV world leader. 2024 should be a pivotal year where they move from a dominating domestic supplier to a well positioned global exporter/manufacturer. There are rumors that a new improved version of the Blade battery will be introduced this year. I'll be establishing an opening position and watch for opportunities to add. BYD is the EV story going forward at $46 and change BYDDY looks discounted to their competition.
WXXWY -25% since_Thursday’s_close_on potential legislation barring US government funding for Chinese biotech companies:
https://www.fiercepharma.com/pharma/wuxi-biologics-plays-defense-after-draft-bill-brands-certain-chinese-biopharmas-security
My understanding is that these batteries are not necessarily better but are much less expensive. Should be excellent for BYD.
Tesla's Struggles With 4680 Cell Production Revealed in New Report From China
https://www.autoevolution.com/news/tesla-s-struggles-with-4680-cell-production-revealed-in-new-report-from-china-227822.html
Cyber truck owners should follow this closely......
On a side note Cathie Wood has the worst record predicting Tesla stock performance. She has a $2,000 a share price for 2027
BYD granted Level 3 ADAS testing license on China’s high-speed roads
https://www.telematicswire.net/byd-granted-level-3-adas-testing-license-on-chinas-high-speed-roads/
BYD breaks ground on its first sodium-ion EV battery plant
https://electrek.co/2024/01/05/byd-breaks-ground-first-sodium-ion-ev-battery-plant/
Musk knows BYD will overwhelm the EV market with a range of cars that Tesla will never be able to duplicate and admits that the only way to stop them is restrictive trade tariffs. Is there an EV trade war brewing? Who is better positioned.....the EU/USA or China? While the Chinese built out their battery and supply chain networks in plain view of the world automotive industry, the world watched and did nothing until it became painfully apparent that China would dominate the new evolving industry. And now, instead of doing everything possible to fast track developing a domestic battery supply chain to compete, the focus has turned to trade tariffs. The only thing trade tariffs will accomplish is slowing the creation of a domestic battery supply chain and force BYD to develop markets in Mexico , South America, Asia, Africa and the Middle East. Europe and the USA domestic EV industry will be isolated and marginalized outside their tariff protected market. What of Tesla and the other car makers in the EU and USA. Well hopefully the Chinese won't retaliate with tariffs of their own on batteries or taxation of foreign manufacturers operating in China. Should be an interesting 2024. BYDDY is trading at close to multi year lows and perhaps will continue to fall. Ironic, considering it has turned the corner from a competitor, to the front runner.
Legitimate question. In any event, the cost of hydrogen delivery will decline with scale.
Unless their big brother legislates it will anyone pay the cost. Hydrogen is 3x the cost of nat gas per btu.
CLF progresses hydrogen use in blast furnaces:
https://finance.yahoo.com/news/cleveland-cliffs-completes-successful-blast-194200321.html
I didn't listen to the TSLA call, but it sounds like a disaster from the various articles I've read. All that hot air hype is now gone....did I read it correctly; Dojo the computer that was worth 1/2 trillion according to MS was pooh poohed by Musk as a "long shot" with a "low probability of success" ???? Now he's talking up a $25,000 EV in 2025 as a product that will drive growth. OK....but what about profit? It's hard to justify the lofty MC looking at the next 1-2 years. I'm still waiting to see if Optimus can make a PB&J without 3 hours of custom software upgrades........
SoCal is only ~5% lower than NorCal. Yeah it's only 12% of the US car market and the first to adopt hybrids. EVs will get similar treatment..
ABT 4Q23 Results by Business Segment
61% of overall corporate sales were ex-US.
%Corp YoY Growth
Segment Sales (const currency)
Medical devices* 43% +17%
Nutrition 20% +13%
Diagnostics 25% -22%†
Pharmaceuticals‡ 12% +9%
ABT reports 4Q23 results—issues 2024 guidance:
https://abbott.mediaroom.com/2024-01-24-Abbott-Reports-Fourth-Quarter-and-Full-Year-2023-Results-Issues-2024-Financial-Outlook
2024 guidance for organic sales growth excluding COVID diagnostics is 8-10%.
2024 guidance for non-GAAP EPS (which excludes FX and restructuring costs) is $4.50-4.70, -12-16% vs $5.34 in 2023. 2024 guidance for GAAP EPS is $3.20-3.40, -13-18% vs $3.91 in 2023. The expected YoY declines in non-GAAP and GAAP EPS are due to lower expected sales of COVID diagnostics, which were $1.59B in 2023.
4Q23 non-GAAP and GAAP EPS were $1.19 and $0.91, respectively, versus $1.03 and $0.59 in 4Q22. The YoY growth in EPS came despite sharply lower sales of COVID diagnostics, which were $288M in 4Q23 vs $1.07B in 4Q22.
4Q23 FreeStyle Libre sales were $1.4B, +26% YoY. FreeStyle Libre is the largest-selling medical device, ever, from any company.
Please see #msg-173691063 for a breakdown of ABT’s 4Q23 sales by business segment.
The US will be a few years behind EU. California has a good chance to match EU and NorCal for sure.
No doubt China will...EU maybe....USA no.
Toyoda is delusional if EV penetration stops at 30%. Watch China and EU blast through that in the next couple of years.
Toyota Chairman: EVs Will Cap At 30% Of Market, 'Engines Will Surely Remain'
https://insideevs.com/news/705724/akio-toyoda-toyota-ev-cap/
If this comes to pass, the EV revolution will have failed.
3M clarification—The 2024 guidance in the preceding post is on a pro forma basis including the healthcare segment being part of 3M for the full year. After the healthcare spinoff, slated for 1H24, 3M will issue updated 2024 guidance for the company excluding the healthcare segment.
3M reports 4Q23 results—issues (tepid) 2024 guidance:
https://investors.3m.com/news-events/press-releases/detail/1821/3m-delivers-strong-fourth-quarter-results-improves
4Q23 non-GAAP EPS—which excludes the cost of the announced earplug and PFAS settlements and related legal expenses—was $2.42, +11% YoY.
4Q23 sales were $8.0B, -0.8% YoY.
4Q23 organic sales growth (excluding FX, acquisitions, and divestitures) was -1.9% YoY.
3M issued 2024 non-GAAP EPS guidance—which excludes the cost of the announced earplug and PFAS settlements and related legal expenses—of $9.35-9.75, +1-6% YoY vs $9.24 in 2023.
2024 guidance for sales growth is 0.25-2.25%. 2024 guidance for organic sales growth is 0-2.0%.
3M’s healthcare spin-off, Solventum, is still slated to occur during 1H24; see #msg-173243340 for related info.
CC slides:
https://d1io3yog0oux5.cloudfront.net/_b81fdcf4b61b3aa85cc07b8e46d6f76a/3m/db/3222/30800/presentation/Q4+2023+Earnings+Slides.pdf
Financial statements:
https://d1io3yog0oux5.cloudfront.net/_b81fdcf4b61b3aa85cc07b8e46d6f76a/3m/db/3222/30800/financial_statement/Q4+2023+Financial+Statement+Information.pdf
Want a 1,000 HP EV sports car? Yangwang U9 was just formally introduced. Interestingly this car can turn a full 360 degrees in place videos on Youtube. At a price point of $150,000 USD this car looks exceptionally inexpensive for those enthusiasts. BYD continues to impress.
Toyota was correct in their evaluation of EV adoption, they will be one of the "winners".
Exactly. We'll move to electrified transportation but not with this generation of electrification. I'd much rather have an AWD 2024 Prius for my daily once I don't need a truck. A 50 mpg grocery getter sounds about right for most people.
I agree...EV's will dominate, but add 15-20 years to the assumed adoption time frame.
TSLA - Looks like something written by someone who has not driven or ridden in anyone of the models. So much FUD. It's a pretty nice ride and I have driven and have been driven in some very nice cars in my life time. Less buttons and mechanicals is elegance as long as it doesn't interfere with safety IMO. EV's are going to take over even if CT fails.
R.I.P........EV USA?
What Happens If EVs Fail In The United States?
https://cleantechnica.com/2023/10/24/what-happens-if-evs-fail-in-the-united-states/
It is a possibility. One thing is certain; all the goofy predictions concerning EV adoption are laughable. They were laughable when they first started talking about adoption rates. Even more ridiculous are politicians pontificating, about and legislating required adoption. My favorite part of the article:
EV for long distance driving - interactive estimate of number of charging stops needed and time added. Not sure if the ICE calculations included stopping for gas but it looks like it does based upon my own experiences.
https://www.sfchronicle.com/projects/2023/ev-car-map/
For driving between SF area and LA area, EV requires 2 charging stops and adds ~1:20 to the drive.
For driving between LA area and LV area, EV requires 1 charging stop and adds ~40 minutes to the drive.
Google Introduces ‘Hypercomputer’ to Its AI Infrastructure
https://www.hpcwire.com/2023/12/11/google-introduces-hypercomputer-to-its-ai-infrastructure/
Google is rapidly turning into a formidable opponent to BFF Nvidia — the TPU v5p AI chip powering its hypercomputer is faster and has more memory and bandwidth than ever before, beating even the mighty H100
https://www.techradar.com/pro/google-is-rapidly-turning-into-a-formidable-opponent-to-bff-nvidia-the-tpu-v5p-ai-chip-powering-its-hypercomputer-is-faster-and-has-more-memory-and-bandwidth-than-ever-before-beating-even-the-mighty-h100
Nvidia is the clear leader in selling hardware to customers. But how big a moat do they have against competitors? Is it realistic to assume they will dominate without increasing competition?
Mexico could help this huge Chinese carmaker crack the US market
https://finance.yahoo.com/news/why-two-countries-could-key-035304856.html
It's on my watch list again Court. Thanks for the heads-up.
European EV Scepticism Could Derail Massive Sales Targets
https://www.forbes.com/sites/neilwinton/2024/01/16/european-ev-scepticism-could-derail-massive-sales-targets/?sh=35a53c956f85
Bottom line.......low cost high quality manufacturers will set the standard. As BYDDY corrects I'll be adding; BYD is the clear leader in cost.
TSLA CT neighbor went to dealer with CT displayed and now changed his mind again back to getting it. I haven't seen one in person yet. I guess I need to put up some marketing rejection shield if I were to look at one in person.
Half of US cities will lose population
https://www.popularmechanics.com/science/a46410256/half-of-us-cities-depopulating-ghost-town-era/
The industry has to go through the current reset which will affect every manufacturer including BYD. But when the rebound begins BYD will still be the best EV/hybrid/battery manufacturer investment. Picking that bottom will be the challenge.
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In many nations, a middle class is emerging for the first time in history.
Companies who satisfy the demands of these consumers in a sustainable manner should have bright prospects.
The Rising Influence of Rising Affluence is a forum for investment ideas based on this premise.
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