Cleveland-Cliffs Stock Is Dropping After Earnings. It’s Cheap, but Scary.

For the fourth quarter, the company reported $1.69 in per share profits, with $1.5 billion in earnings before interest, taxes, depreciation, and amortization, from $5.3 billion in sales. Wall Street was looking for $2.11 a share, $1.7 billion in Ebitda, and $5.7 billion in sales, according to FactSet.

Steel sales “volumes were weaker than we had modeled at 3.4” million tons, wrote Citigroup analyst Alexander Hacking in a report reacting to the earnings news. That is down 19% compared with the third quarter, according to the analyst. Cliffs “has more exposure to autos and potentially more commitment to supply discipline,” Hacking said.

Auto production has been constrained due to a lack of semiconductors. That might have affected demand for Cliffs’ steel. The remark about commitment to supply discipline refers to not piling more steel into an oversupplied market.

Steel prices are falling hard. Prices for hot-rolled coil, a key benchmark, are at about $1,135 a ton, down from $1,900 a ton at the end of the third quarter.

The slump is a big reason Cliffs stock trades for less than four times estimated 2022 earnings per share. That isn’t a big multiple; it may indicate that investors expect earnings estimates to drop as steel prices decline.

The company hosts a conference call at 10 a.m. Eastern time to discuss the results. Analysts and investors will be eager to hear about the direction of steel prices as well as supply and demand dynamics in the U.S. steel business.

Write to Al Root at allen.root@dowjones.com