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Cleveland-Cliffs (CLF) is soaring today after reporting its Q3 results this morning. The steelmaker topped EPS expectations, although revenue came in slightly below estimates, increasing 18.5% yr/yr to $5.61 bln. However, management highlighted its strongest quarterly performance in three years and offered a substantially stronger outlook, likely driving today's rally.

• CLF said its earnings recovery is firmly underway, supported by improvements across its three major profit drivers: higher shipments, stronger selling prices, and better-than-expected costs. Management pointed to a favorable domestic trade environment, with reduced steel imports and longer lead times supporting stronger pricing and demand for domestically produced steel.
• Steel shipments increased to 4.15 mln tons from 4.03 mln in Q2, while average selling prices climbed $53/ton to $1,177. Unit costs declined $17/ton, exceeding expectations for a $10/ton reduction, reflecting higher mill utilization. Canadian subsidiary Stelco also returned to positive adjusted EBITDA amid stronger hot-rolled steel prices.
• Adjusted EBITDA more than doubled sequentially to $612 mln from $286 mln, above guidance of $575 mln. Management expects further improvement to approximately $715 mln in Q4, as higher selling prices more than offset seasonal softness, maintenance outages, and increased input costs.
• Perhaps most importantly, CLF expects 2027 adjusted EBITDA to exceed $4 bln, supported by favorable contract renewals and prevailing steel price forecasts. Management expects renewed contracts to generate over $1 bln in yr/yr EBITDA improvement before additional changes in steel indices, with customers seeking greater contracted volumes and accepting new take-or-pay provisions.

Briefing.com Analyst Insight

Overall, this was a stronger-than-expected quarter, supported by a favorable domestic trade environment that is driving higher steel prices, increased shipments, and improved operating efficiency. The 2027 outlook is particularly encouraging, with favorable contract renewals and new take-or-pay provisions providing greater earnings visibility and reinforcing management's confidence in a sustained recovery. While profitability remains sensitive to steel prices, these developments should support continued profitability improvement, stronger cash flow generation, and accelerated debt reduction.