Cleveland-Cliffs Stock Drops as China Recovery Slows

Shares of Cleveland-Cliffs  (CLF) - Get Report dropped Monday afternoon as the company and other metals and mining stocks were caught up in a slowdown of the growth in the recovery of the Chinese economy. 

Weaker-than-expected industrial output and retail sales data from China suggested the world's second-largest economy has been struggling to maintain its growth momentum as COVID-19 cases rise and global supply chains remain disrupted.

Copper prices dropped Monday, falling 1.4% to $432.05 per pound on the Comex. 

BMO analyst David Gagliano remained positive on the sector saying that most of the companies in coverage remain undervalued as they are set to continue to generate significant free cash flow. 

However, Cleveland-Cliffs shares on Monday fell 1.9% to $25.36 at last check along with U.S. Steel  (X) - Get Report, Nucor  (NUE) - Get Report, and Freeport-McMoran  (FCX) - Get Report. 

Last month, Cleveland-Cliffs shares slumped after it reported softer-than-expected second-quarter earnings even as shipment volumes and cost inputs continue to improve.

Cleveland-Cliffs said adjusted profits for the three months ending in June were pegged at $1.46 per share, a figure that surged well ahead of last year's tally of 28 cents but fell short of the Street consensus forecast of $1.52 per share. Group revenues, Cleveland-Cliffs said, rose nearly fourfold from last year to $5.05 billon, essentially matching analysts' estimates of a $5.01 billion tally.

Looking into the current quarter, Cleveland-Cliffs said it sees adjusted earnings of about $1.8 billion, compared to a consensus of about $1.9 billion, and free cash flow generation of about $1.4 billion, which CEO Lourenco Goncalves said will set up a "monumental debt reduction during the back half of this year."