CLF: Cost Discipline And Trade Concerns Will Shape Outlook Into Year End

Analysts have slightly lowered their average price target for Cleveland-Cliffs to $12.45 from $12.58, citing a challenging macro environment for metals and mining. However, this is offset by potential demand rebounds in key regions.

Analyst Commentary

Recent analyst coverage of Cleveland-Cliffs reflects a mix of optimism and caution, highlighting several factors shaping the current outlook on the stock.

Bullish Takeaways

• Bullish analysts have raised price targets following the company's latest earnings, noting improved operational execution and stronger-than-expected performance in recent quarters.
• Potential rebounds in demand within the U.S. and European metals markets are cited as catalysts that could drive future revenue growth and margin expansion.
• Some analysts identify positive momentum in the U.S. spot steel market, which could translate into higher realized prices for Cleveland-Cliffs toward year end.
• The company's ongoing cost management efforts and exposure to key steel-consuming end markets are viewed as positioning for incremental upside if macro conditions improve.

Bearish Takeaways

• Bearish analysts have pointed to a challenging macro backdrop, with slowing commodity demand from China potentially limiting upside for North American metals producers.
• Concerns remain regarding the company's streak of negative gross margins, raising questions about longer-term profitability and sustainability of recent rallies.
• Recent price rallies in the stock are viewed by some as overreactions to company announcements or market optimism, rather than indicators of a durable turnaround.
• There is skepticism that recent developments, such as potential rare earth assets or agreements with foreign mills, will meaningfully impact valuation in the near term.

What's in the News

• The European Union is warning against possible U.S. expansion of steel and aluminum tariffs, which could impact Cleveland-Cliffs and other major industry players (Bloomberg).
• Cleveland-Cliffs and POSCO have formalized a strategic partnership through a Memorandum of Understanding. This aims to deepen industrial cooperation following the new U.S.-Korea trade agreement.
• The company has successfully completed a production trial, allowing its steel to replace aluminum in automotive applications using existing equipment. This has led to increased routine orders from a major OEM.
• Cleveland-Cliffs completed a follow-on equity offering and raised approximately $951.75 million through the sale of common shares.
• The lawsuit filed in January 2025 by United States Steel Corporation and Nippon Steel against Cleveland-Cliffs and certain executives was voluntarily dismissed in September, with all parties released and no financial consideration exchanged.

Valuation Changes

• Consensus Analyst Price Target: Slightly reduced from $12.58 to $12.45, reflecting a modest downward revision.
• Discount Rate: Lowered from 11.28% to 10.45%, indicating a less risky outlook from analysts.
• Revenue Growth: Increased marginally from 6.13% to 6.17%.
• Net Profit Margin: Decreased slightly from 2.77% to 2.74%.
• Future P/E: Lowered from 14.00x to 13.59x, indicating a more conservative future valuation.