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

Core Viewpoint - Cleveland-Cliffs Inc. has gained renewed confidence from Wall Street after better-than-expected Q2 2025 results, leading to an upgrade by KeyBanc Capital Markets to Overweight with a price forecast of $14 [1][5]. Financial Performance - The company reported a narrower adjusted loss of $0.50 per share for Q2 2025, beating expectations, with revenue of $4.93 billion [2]. - Steel shipments reached a record 4.3 million net tons, although the average selling price declined. Cost-cutting measures reduced steel unit costs by $15 per ton [3]. - Adjusted EBITDA turned positive at $97 million, and the company lowered its 2025 capital expenditure and SG&A guidance, expecting further cost improvements in the second half [3]. Strategic Insights - CEO Lourenco Goncalves highlighted strong domestic steel demand, a healthy order book, and supportive policy from the Trump administration. The end of a loss-making slab supply deal is expected to enhance margins and accelerate free cash flow and debt reduction [4]. - The upgrade reflects increased confidence in Cleveland-Cliffs' cost-cutting efforts and operational efficiencies, particularly in the high-margin automotive segment, alongside favorable trade protections and reshoring trends [5]. Future Outlook - The analyst revised the 2025 outlook, projecting EBITDA of $419 million, more than double the previous estimate. For Q3 2025, EBITDA expectations were raised to $197 million from $123 million, aided by an additional $20 per ton in cost savings [6]. - For 2026, EPS forecast was raised to $0.42 and EBITDA to $1.86 billion, with potential for EBITDA to exceed $2 billion if U.S. and Canadian steel prices outperform expectations [7]. Valuation and Asset Management - Valuation remains attractive, with shares trading at about 7x 2026 EV/EBITDA, within historical norms. The $14 price forecast reflects a multiple toward the higher end of that range, considering potential asset sales and stronger steel pricing [8]. - The company is exploring non-core asset divestitures, engaging J.P. Morgan to lead the sales process for idle properties, which could yield "billions of dollars" and enhance financial flexibility and shareholder returns [9].