Cleveland-Cliffs Rides Cost Cuts And Trump Tariffs To Stronger Outlook, Eyes Billions From Asset Sales

Cleveland-Cliffs (CLF) reported better-than-expected Q2 2025 results, posting a narrowed adjusted loss, positive adjusted EBITDA of $97 million, and record steel shipments of 4.3 million net tons, driven by aggressive cost-cutting. This performance prompted KeyBanc to upgrade the stock to Overweight with a $14 price target, citing improved margins, a favorable risk-reward outlook, and the potential for significant value creation from non-core asset divestitures. The company's shares reacted positively, gaining over 6% following the news.

Analysis

Cleveland-Cliffs (CLF) is demonstrating a significant operational turnaround, as reflected in its second-quarter 2025 results which surpassed market expectations. The company reported a narrowed adjusted loss of $0.50 per share, achieved positive adjusted EBITDA of $97 million, and set a record for steel shipments at 4.3 million net tons. This performance is underpinned by aggressive cost-cutting initiatives that have reduced steel unit costs by $15 per ton, alongside a lowered full-year 2025 guidance for capital expenditures and SG&A. The bullish outlook is further supported by CEO Lourenco Goncalves' commentary on a strong domestic order book and the impending termination of a loss-making slab supply agreement, which is expected to directly improve margins and accelerate free cash flow for debt reduction. KeyBanc's upgrade to Overweight with a $14 price forecast—citing revised EBITDA estimates of $419 million for 2025 and $1.86 billion for 2026—highlights growing confidence in the company's strategy. A key potential catalyst is the strategic review of non-core assets, which management believes could yield 'billions of dollars' and significantly enhance financial flexibility. While the stock's valuation at approximately 7x 2026 EV/EBITDA is within historical norms, it is important to note that other analysts from Citigroup, Morgan Stanley, and JP Morgan maintain more cautious Neutral or Equal-Weight ratings, indicating a divergence in Wall Street sentiment.

Key Decisions for Investors

• Given the demonstrated progress in cost reduction, record shipment volumes, and positive EBITDA, investors may view the current valuation of approximately 7x 2026 EV/EBITDA as an attractive entry point, aligning with KeyBanc's bullish thesis.
• Monitor developments on the planned divestiture of non-core assets such as the Riverdale and Steelton properties, as a successful sale process generating significant proceeds would serve as a major catalyst for deleveraging and shareholder returns.
• It is prudent to weigh KeyBanc's optimistic outlook against the more cautious Neutral ratings from other analysts, remaining mindful of inherent risks such as steel price volatility and fluctuations in automotive demand.
• Investors should scrutinize upcoming quarterly results for evidence of margin expansion and accelerated free cash flow, particularly following the conclusion of the unprofitable slab supply agreement, which is a critical pillar of the company's deleveraging narrative.