Cleveland-Cliffs Q2 Earnings: The Tide Is Finally Turning

Cleveland-Cliffs' Q2 results demonstrate tangible progress in its turnaround, marked by improved shipments, higher Average Selling Price (ASP), and reduced costs. The company's strong liquidity, trimmed CAPEX and SG&A, and supportive tariffs are bolstering its outlook, with key future catalysts including the upcoming expiration of the ArcelorMittal/Nippon Steel contract and strength in the U.S. auto sector. Despite ongoing net losses, the visible operational improvements and potential for positive EPS/sales revisions underpin a maintained Buy rating, citing undervaluation.

Analysis

Cleveland-Cliffs' (CLF) second-quarter results demonstrate tangible progress in its operational turnaround, characterized by improved shipment volumes, higher average selling prices (ASP), and reduced costs. The company's financial discipline is evident through trimmed capital expenditures and SG&A, contributing to a strong liquidity position. The outlook is further supported by external factors, including strength in the U.S. auto sector and protective tariffs that bolster domestic steel demand and profitability. A key forward-looking catalyst is the upcoming expiration of the ArcelorMittal/Nippon Steel contract, which is anticipated to provide a further boost to EBITDA. Despite these positive operational signals and the expectation of upward revisions to EPS and sales estimates, the company continues to report net losses, which remains a central risk factor.

Key Decisions for Investors

• Given the visible turnaround progress and perceived undervaluation, investors may view the potential for positive EPS and sales revisions as a bullish signal.
• Monitor key external catalysts closely, specifically the performance of the U.S. auto sector and any changes to steel tariff policies, as these are critical drivers for CLF's profitability.
• The primary risk remains the ongoing net losses; therefore, assess the company's path to sustained profitability before increasing exposure.
• Track developments related to the expiration of the ArcelorMittal/Nippon Steel contract, as this is a significant, near-term event that could positively impact CLF's earnings.