Cleveland-Cliffs, one of the largest US steelmakers, reported its strongest quarterly performance in three years, powered by higher steel prices and increased shipments. The company also used the momentum to lift its 2027 profit outlook, a move that analysts say reflects improving contract terms rather than just a one-off price spike.
A sharp turnaround in earnings
For the third quarter, Cleveland-Cliffs swung to adjusted earnings of $0.28 per share, compared with a loss of $0.45 per share in the same period last year. That beat Wall Street expectations. Revenue climbed to $5.61 billion, helped by steel shipments of 4.15 million net tons and an average selling price of $1,177 per net ton.
The stronger pricing and volume pushed adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $612 million, up sharply from $143 million a year earlier. The company guided to roughly $715 million in adjusted EBITDA for the fourth quarter, though it cautioned that seasonality and planned maintenance outages would partially offset the benefit of higher prices.
Why the 2027 target matters
The bigger signal for investors came from management's decision to raise its 2027 adjusted EBITDA target to more than $4 billion, up from a previous goal of $3.3 billion. According to B. Riley Securities, the upgrade is tied to contract repricing: smaller discounts on index-linked contracts and resets on fixed-price deals.
In plain terms, Cleveland-Cliffs is arguing that as its contracts roll over, it can capture more of any strength in steel prices. That's important because steel prices can move quickly, but many mills don't feel that change immediately—a large share of their sales are locked into contracts that reset periodically. If those contracts are now being repriced more favorably, the company can turn market price levels into realized revenue with less lag.
The company is also trimming capacity at its Canadian Stelco unit by idling some galvanizing lines, a move that could help balance supply and support prices.
What it means for investors
For everyday investors, this earnings report shifts the debate from whether the third quarter was a lucky quarter to whether Cleveland-Cliffs has genuinely raised its through-cycle earning power into 2027. The raised target suggests management believes the improvement is sustainable, not just a temporary boost from a hot spot market.
That perspective is also relevant for the broader steel sector. When Steel Dynamics reports after the close Monday and Nucor reports later this month, markets will be listening for similar signs that contract rollovers can keep profits elevated even if spot prices cool.
Steel is a cyclical industry, and prices can be volatile. But the contract dynamics that Cleveland-Cliffs highlighted could mean that even if spot prices soften, realized prices—the actual prices mills receive—might hold up better than in past cycles. That would be a positive for the company's cash flow and for investors who hold its stock.
It's also worth noting that the global steel market remains under pressure, with Chinese steel output climbing in September while profits stay razor-thin. That oversupply could eventually weigh on prices, but Cleveland-Cliffs' contract structure may provide some insulation.
Looking ahead
Investors will be watching whether the company can deliver on its fourth-quarter guidance and whether the contract repricing trend continues into 2026 and beyond. The raised 2027 target is a bold statement, and it will be tested by the cyclical nature of steel demand.
For now, the market appears to be taking the news positively, as the stock has responded to the stronger earnings and the upgraded outlook. But as always, steel is a business where conditions can change quickly, and investors should keep an eye on global supply, demand, and pricing trends.
