Investment Idea of the Day: Freedom Expects Cleveland-Cliffs Shares to Rise

Freedom Broker analysts recommended buying shares of U.S. steelmaker Cleveland-Cliffs (CLF) with a two-month target price of $13.90. Upside from the indicated current price of $12.8 is almost 9%. Key catalysts could be strong Q3 results, favorable conditions in the U.S. steel market, and improved 2027 earnings expectations.

What Cleveland-Cliffs does

Cleveland-Cliffs produces steel products and supplies them to automakers, industrial companies, the infrastructure sector, distributors, and other steelmakers.

In Q2 2026, 45% of steel product sales came from hot-rolled steel, 31% from coated products, 15% from cold-rolled steel, 4% each from plate, stainless, and electrical steel, and another 1% from other products.

Profit could rebound sharply in Q3

Meeting the EBITDA forecast along with further deleveraging could confirm Cleveland-Cliffs’ shift to a sustainable recovery in profitability and become the main corporate catalyst for the stock, Freedom Broker analysts note.

The company expects adjusted EBITDA in Q3 to total approximately $575 million. That is more than double the $286 million recorded in Q2 and well above the Q1 result of $95 million.

The improvement already showed up in the April–June reporting. Cleveland-Cliffs’ consolidated revenue rose from $4.9 billion in Q1 to $5.2 billion in Q2. Operating cash flow was $230 million. The company returned to positive free cash flow and began reducing debt.

Management expects further improvement thanks to a higher average realized selling price, increased sales volumes, and lower costs. According to the company’s forecast, results in the second half could be the strongest since 2021, with Q4 EBITDA expected to exceed the Q3 guidance.

Limited imports support steel prices

The second pillar of the investment idea is the situation in the U.S. domestic market. From January to April 2026, steel imports into the country fell 29% year over year and remain well below historical levels.

Additional protection for U.S. producers is provided by 50% tariffs under Section 232. This provision of U.S. law allows trade restrictions to be imposed on imports that authorities consider a threat to national security. High tariffs reduce the competitiveness of foreign steel and limit its supply in the U.S. market.

Against this backdrop, the average price of hot-rolled coil, or HRC, reached $1079 per ton in Q2. The figure rose 19% year over year and was the highest since 2022. Hot-rolled coil is one of the main types of flat-rolled steel and is used in automotive manufacturing, industry, and construction.

Despite lower shipments, revenue in the steelmaking segment increased to $5.052 billion from $4.757 billion in Q1 and $4.771 billion a year earlier. Cash margin rose to $349 million versus $136 million in the prior quarter and $138 million a year ago. Gross margin reached $113 million after a negative $95 million in Q1 and $228 million a year earlier.

New contracts could add more than $1 billion in EBITDA

Freedom Broker analysts also highlight the repricing of long-term contracts as one of the key drivers of earnings growth in 2027. All fixed-price agreements outside the automotive segment are to be renegotiated next year. Existing agreements were signed under weaker market conditions, so new terms could be more favorable for the company.

Cleveland-Cliffs estimates the minimum potential EBITDA uplift from contract repricing at about $500 million. Another roughly $500 million could come from improved performance at its Canadian unit Stelco. Taken together, these two factors could deliver more than $1 billion of additional EBITDA in 2027.

In Q2, steelmaking segment revenue from shipments to distributors and processors amounted to $1.6 billion, or 33% of sales. The automotive sector accounted for $1.5 billion, or 29%, infrastructure and industry for $1.4 billion, or 28%, and other steelmakers for $526 million, or 10%.

Cash flow and debt reduction bolster the investment thesis

Cleveland-Cliffs ended Q2 with liquidity of $3.1 billion. The company maintained its full-year 2026 shipment guidance in the range of 16.5–17.0 million tons. Capex is expected at about $700 million, selling, general and administrative expenses at approximately $575 million, and depreciation at about $1.1 billion.

Management plans to continue reducing debt and to bring the debt-to-EBITDA ratio below 2.5x around mid-2027. Delivering on this guidance, together with EBITDA growth, could strengthen the company’s financial profile.

At the same time, the idea is classified as high risk. Steel prices depend on the health of U.S. industry, import volumes, and trade policy, and achieving the target price assumes the EBITDA forecast is met and favorable market conditions persist.

This is not an individual investment recommendation.