The Rising Influence of Rising Affluence

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This Steel Maker’s Stock Buyback Backfired. How Not to Get Burned.
By Al Root
April 25, 2024, 2:30 am EDT


Cleveland-Cliffs spent some $600 million repurchasing 30.4 million shares in the first quarter, amounting to about 6% of the total stock outstanding.

CLF reported first-quarter earnings on Monday. Bottom-line earnings missed estimates by a few cents a share, and the stock dropped 11%. That wasn’t the biggest reason for the drop, though.

The company spent some $600 million repurchasing 30.4 million shares in the first quarter, amounting to about 6% of the total stock outstanding. It also announced an additional $1.5 billion repurchase authorization. It had stopped paying a quarterly dividend during the pandemic.

Investors typically cheer large capital returns, whether they be buybacks or dividends. The problem is that Wall Street projects a 2024 free cash flow for the company of about $530 million, and $770 million for 2025—and those numbers don’t support its buybacks.

Capital return to shareholders is great, but investors don’t like robbing Peter to pay Paul.

https://www.barrons.com/articles/3m-cleveland-cliffs-buyback-dividends-c646c1d3?mod=hp_LEAD_6