Cleveland-Cliffs’ stock buyback backfired, Barron’s says

Steel maker Cleveland-Cliffs reported first-quarter earnings on Monday. Bottom-line earnings missed estimates by a few cents a share, and the stock dropped 11%, but that wasn’t the biggest reason for the drop, though, Al Root writes in this week’s edition of Barron’s. The company spent some $600 million repurchasing 30.4M shares in the first quarter, amounting to about 6% of the total stock outstanding. It also announced an additional $1.5B repurchase authorization. It had stopped paying a quarterly dividend during the pandemic, the author notes. 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 $530M, and $770M for 2025-and those numbers don’t support its buybacks.