Cleveland-Cliffs Breaks to New Highs on Earnings, More Upside?

Key Points

• Cleveland-Cliffs just gave investors another reason to stick by it, as a 24% rally after earnings shows why this steelmaker still has room to run.
• Institutions bought before the big swing, but management suggests this bull run is only getting started.
• With tariffs in place to support local steel demand and prices, analysts shoot for a big EPS swing.

One of the most overlooked corners of the U.S. economy—the basic materials sector—just reminded investors why it’s worth paying attention. Shares of Cleveland-Cliffs Inc. NYSE: CLF soared more than 24% in a single day after the company reported earnings.

This business's share price was already low pre-rally, offering a strong risk-to-reward ratio. Now that it has hit a new 52-week high, investors may wonder if there's more upside. Analyzing industry dynamics can help those still deciding.

Zooming out a bit from Cleveland-Cliffs, and why there’s still a technical reason to expect further highs, investors can consider the performance spread between the S&P 500 index and the Materials Select Sector SPDR Fund NYSEARCA: XLB, creating enough headroom for companies in this space to carry out a further bull run in the coming months, especially as the broader economic environment serves as a tailwind for this scenario to take place.

Breaking Down the Cleveland-Cliffs Quarter

Bears noted that Cleveland-Cliffs reported lower volume and revenue, with four million net tons earning $4.7 billion, down 4% from last year's $4.9 billion. However, how revenue was generated matters more. The company's revenue distribution is shifting towards infrastructure and automotive projects, linking this change to current tariffs and clarifying the rally for investors.

After President Trump implemented tariffs on foreign-assembled vehicles and imported steel, most participants began to expect a severe slowdown in domestic activity and production. However, the end result was support for the industry, as companies began seeking producers like Cleveland-Cliffs to circumvent these tariffs.

In fact, Lourenco Goncalves (Cleveland-Cliffs’ CEO) mentioned in the earnings release that all major original equipment manufacturers (OEMs) locked in multi-year agreements to have this steelmaker as their main provider. This not only enhances the company's pricing power but also diversifies a nearly guaranteed stream of revenue moving forward.

This results in some balance sheet strengthening, and the net liquidity of $3.1 billion for the quarter demonstrates that Cleveland-Cliffs is well-positioned to capitalize on a rebound in the industry as a whole. In addition to these benefits, the company can begin to command a premium compared to its peers in the space, as its strength starts to translate into higher prices.

How Markets Feel About Cleveland-Cliffs Now

After pushing the stock into bear market territory, most participants would be remiss to remain bearish on this company, not only because of its momentum, but also for what it has in store for the future. That future is synonymous with bullish outcomes, and State Street knows this to be the case in Cleveland-Cliffs stock. State Street increased its stake in the steelmaker by 20.2% in August 2025, bringing its net position to a high of $208.6 million as of today. 

These institutional buyers aren’t alone in this view, as markets have brought Cleveland-Cliffs stock to a price-to-book (P/B) ratio of 1.2x today, a premium of 41% compared to the steel industry’s average P/B of only 0.84x. This is where some investors may become wary of being exposed to the stock, as they believe it is now overvalued in retrospect.

Markets often assign premium valuations to companies that consistently outperform both their peers and the broader S&P 500—a pattern Cleveland-Cliffs has followed in recent quarters.

Looking ahead, expectations for a strong rebound remain high. With multi-year supply agreements in place, growing demand from infrastructure and automotive partners, and policy tailwinds from tariffs, Cleveland-Cliffs is positioned to deliver a meaningful turnaround in profitability. Becoming a go-to supplier for major OEMs and a key player in U.S. infrastructure buildouts gives the company a platform for long-term revenue growth and margin expansion.