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Cleveland-Cliffs Successfully Completes AK Steel Buyout

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Cleveland-Cliffs Inc. (CLF - Free Report) recently announced that the acquisition of AK Steel Holding Corporation has been completed successfully. The combined company will be led by Cleveland-Cliffs’ chairman, president and chief executive officer, Lourenco Goncalves.

Per Cleveland-Cliffs, this is a new era for the company as a producer of differentiated, high-quality iron ore, steel and metallics in North America. The deal combines North America’s largest iron ore pellets producer downstream into the production of value-added steel and specialty manufactured parts for the automotive industry.

The combined company will have a unique position in the industry. Cleveland-Cliffs will possess a dynamic combination of assets — two efficient integrated blast furnace steel mills along with a new state-of-the-art hot briquetted iron (HBI) facility, two electric arc furnace plants and many other technologically developed facilities.    

Shares of Cleveland-Cliffs have plunged 52.7% in the past year compared with the industry’s 33% decline.

In fourth-quarter 2019 earnings call, Cleveland-Cliffs stated that it expects average iron ore prices, steel prices and pellet premiums to be $90 per metric ton, $650 per short ton and $50 per metric ton, respectively, for 2020. Based on these assumptions, the company expects to generate net income of $300-$325 million and adjusted EBITDA of $550-$575 million for 2020 on a standalone basis.

Zacks Rank & Key Picks

Cleveland-Cliffs currently carries a Zacks Rank #4 (Sell).

Few better-ranked stocks in the basic materials space are Newmont Corporation (NEM - Free Report) , Franco-Nevada Corporation (FNV - Free Report) and Impala Platinum Holdings Limited (IMPUY - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Newmont has an expected earnings growth rate of 72% for 2020. The company’s shares have gained 19.7% in the past year.

Franco-Nevada has an expected earnings growth rate of 24.2% for 2020. Its shares have returned 16.4% in the past year.    

Impala Platinum has an expected earnings growth rate of 424.1% for fiscal 2020. The company’s shares have rallied 31.5% in the past year.

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