CEO Lourenco Goncalves said the "progression we have been forecasting is now reality.”
- Cleveland-Cliffs returned to positive free cash flow in the second quarter and said it has begun reducing debt, with a leverage target of under 2.5x by this time next year.
- Management expects higher steel prices, increased shipments, and lower unit costs to drive a sharp improvement in EBITDA during the second half.
- The company cited stronger domestic steel demand, lower import competitiveness, improving automotive volumes, and AI-driven operational efficiencies among the key tailwinds.
Shares of Cleveland-Cliffs (CLF) soared in morning trade on Thursday after CEO Lourenco Goncalves forecast the company would deliver its strongest second-half earnings performance since 2021 moving forward.
CLF’s stock jumped nearly 20% in morning trade, clocking its biggest single-day gain since October last year and hitting its highest level in about a month. The stock was among the top trending tickers on Stockwits at the time of writing.
During the earnings call, CEO Lourenco Goncalves said the quarter "still understates" where the business is headed over the coming quarters, adding that "the progression we have been forecasting is now reality."
Second-quarter (Q2) revenue came in at $5.2 billion, topping Wall Street estimates of $5.14 billion. The company reported a loss of $0.20 per share, narrower than the expected loss of $0.22 per share.
CEO Expects Strongest Second Half Since 2021
Goncalves said Cleveland-Cliffs expects its leverage target to fall below 2.5x by this time next year as “the cash flows generated from both ongoing profit and asset sales will be used to delever over that time frame.”
Management said third-quarter earnings before interest, tax, depreciation, and amortization (EBITDA) would more than double in the third quarter (Q3) compared to the Q2 level, with fourth-quarter (Q4) EBITDA expected to exceed third-quarter levels.
"With average selling prices, volumes, and costs all moving in the right direction, our second-half earnings performance should be our strongest since 2021," he said.
He added that the uptick would be supported by average selling prices projected to increase by roughly $55 per net ton from the second to the third quarter, shipments are expected to rise by about 300,000 net tons, and unit costs are forecast to decline by approximately $10 per net ton.
During the earnings call, management also said extended maintenance outages that weighed on Q2 production are now complete, automotive shipments continue to improve, and higher utilization across finishing lines should help absorb fixed costs.
Domestic Steel Market Continues To Improve
In addition to the core financials, the company said several market conditions have also turned more favorable in recent months.
Management pointed to stronger domestic steel demand, subdued imports, longer lead times, and higher hot-rolled coil prices during the earnings call. Executives also said geopolitical tensions, including the conflict involving Iran, have increased global energy, freight, and steel production costs, making imported steel less competitive in the U.S. market.
The firm added that data center construction and border wall projects were among the strongest sources of domestic demand. It also noted improving conditions in Canada's hot-rolled steel market and said its partnership with Palantir (PLTR) was helping to improve operational efficiency through AI.
How Is Retail Feeling About CLF Stock?
Retail sentiment around the steelmaker improved to 'extremely bullish' from 'bullish' over the past day, while chatter climbed to 'high' from 'normal' levels. Platform data showed message volume rose more than 40% over the past 24 hours.
Retail investors on Stockwits applauded the improved guidance, positive free cash flow, and debt reduction, calling them signs that "all positive news" lies ahead.
Despite Thursday’s morning rally, CLF’s stock is down nearly 16% year-to-date and has traded flat over the past 12 months.
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