Cleveland-Cliffs rallies after earnings beat and a raised outlook

What did Cleveland-Cliffs report for the quarter?

Cleveland-Cliffs (NYSE: CLF) shares surged 16.3% on Monday and closed at $14.10. The stock had ended the prior session at $12.12. Shares worth $1.2 billion changed hands during the day. In after-hours trading, the stock edged up 0.2%.

Why it matters: The steelmaker's third-quarter adjusted earnings came in above the consensus, the average forecast of the analysts who follow the company. Adjusted figures leave out one-off items. Revenue, however, missed the consensus.

Adjusted EBITDA, a rough gauge of operating profit, rose from the second quarter. It also beat the company's own forecast. Steel shipments grew compared with the same quarter a year earlier.

Why did the shares rise so sharply?

Much of the focus fell on the outlook. Guidance is a company's own forecast for its coming results, and Cleveland-Cliffs raised its view. The company expects fourth-quarter adjusted EBITDA to rise from the third-quarter level.

Chief Executive Lourenco Goncalves called the third quarter the company's strongest in years. He credited higher selling prices, larger shipments and lower costs per ton than in the prior quarter.

Goncalves also pointed to low steel imports, longer delivery waits and customers who increasingly value reliable domestic suppliers. The company laid out an adjusted EBITDA target for 2027 that it ties to signed customer contracts and current price forecasts.

Cleveland-Cliffs said it expects to cut debt significantly in the fourth quarter. It plans to use stronger free cash flow, the cash left after running and investing in the business, plus proceeds from property sales. The rally stood out on a day when the S&P 500 rose 0.4% and a fund tracking materials stocks edged up 0.1%.

What is changing at Stelco in Canada?

Stelco, the Canadian steelmaker Cleveland-Cliffs bought in 2024, posted its best quarter since the deal. It gained from a firmer market for hot-rolled steel in Canada.

Galvanized steel, which is coated to resist rust, is a different story. The company said Canada's market for it remains oversupplied and that government action it had hoped for has not come. It has idled Stelco's galvanizing lines indefinitely.

Cleveland-Cliffs said it expects affected employees to return when conditions improve. Stelco plans to hold overall output steady by shifting toward hot-rolled steel. The company said it expects that shift to lift profit and preserve Canadian jobs.

What could hold the stock back?

The other side: The revenue miss shows that not every part of the report topped expectations. Even after Monday's rally, the shares sit 12.9% under their 52-week high of $16.18, the highest price of the past year.

The company itself flagged fourth-quarter headwinds. It named seasonal pressures, planned maintenance shutdowns and higher costs. It expects stronger pricing to offset those only in part.

The longer-range target rests on current price forecasts, and steel prices can change. The Stelco shutdown also shows how oversupply can weigh on parts of the business.

What could come next for the shares?

What’s next: Several economic reports could shed light on steel demand. Data on September housing starts and building permits, an early read on construction, is scheduled for Oct. 20. A report on September orders for durable goods such as machinery follows on Oct. 27.

The Federal Reserve announces its interest-rate decision on Oct. 28 at 2 p.m. ET. An early estimate of third-quarter economic growth is due on Oct. 29 at 8:30 a.m. ET.