CLF: Higher Leverage And Tariff Shift Will Pressure Future Returns

Analysts have shifted their view on Cleveland-Cliffs with a higher blended price target near $13 to $14, supported by updated steel price assumptions, expectations for firmer Q2 and second half demand, and modestly higher modeled margins, even as some still flag leverage as a constraint on the stock's P/E multiple.

Analyst Commentary

Recent research on Cleveland-Cliffs reflects a mix of constructive and cautious views, with several firms updating steel price assumptions, earnings models, and valuation frameworks ahead of sector guidance and mid-quarter previews.

Bullish Takeaways

Bullish analysts see room for Cleveland-Cliffs to track improved Q2 steel price assumptions, which supports higher modeled earnings and a blended price target range around the low to mid teens.
Updates to steel group models ahead of Q2 reporting point to expectations for a solid Q2 earnings print and a “better than seasonal” second half of 2026, which underpins Neutral and Equal Weight ratings rather than more cautious stances.
Some research highlights unusually lean service center inventories, suggesting restocking activity could help support volumes and pricing even if Q3 demand softens seasonally, an outcome that would be constructive for Cleveland-Cliffs’ execution against its volume and margin assumptions.
Analysts referencing cost improvement efforts and the roll off of a legacy slab contract point to potential margin improvement, which, if delivered, could help support the current valuation despite balance sheet concerns.

Bearish Takeaways

Bearish analysts emphasize Cleveland-Cliffs’ higher leverage, arguing that this warrants a lower P/E multiple relative to peers and justifies more conservative price targets around the high single digits.
Some research frames Cleveland-Cliffs as less preferred within the broader metals and mining coverage, with Underweight ratings contrasting with Overweight stances on other steel and mining stocks, which may limit relative upside if sector sentiment improves.
Even among more constructive firms, the retention of Neutral or Equal Weight ratings signals that execution on margins and balance sheet discipline remains a key hurdle before more aggressive re-rating cases are considered.
Where analysts expect steel prices to remain firm only through a specific period, they also flag the potential for a later price correction as supply catches up with demand, which could pressure earnings expectations and keep valuation in check if it materializes.

What's in the News

Cleveland-Cliffs was named General Motors’ 2025 Supplier of the Year, its ninth time receiving the honor, reinforcing its role as a key automotive steel supplier to GM and a significant player in the North American auto steel market (source: Cleveland-Cliffs Stock Climbs On Key GM Supplier Award, 2 Jun 2026).
The stock moved higher after President Trump reduced tariffs on certain steel products from 25% to 15%. This policy shift is expected to affect the competitiveness of domestic steel producers such as Cleveland-Cliffs and influenced market sentiment toward the stock (source: Cleveland-Cliffs (CLF) Stock Rises Following Tariff Adjustments, 2 Jun 2026).
The company reported that from 1 Jan 2026 to 31 Mar 2026 it repurchased 0 shares for US$0 under its existing buyback. Overall, it has completed the repurchase of 7,507,249 shares for US$124.22m under the program announced on 22 Apr 2024 (source: company buyback tranche update).

Valuation Changes

Fair Value was updated from $10.67 to $11.60, indicating a modest upward adjustment in the modeled valuation baseline.
The Discount Rate was reduced from 12.04% to 11.28%, reflecting a slightly lower required return in the updated assumptions.
Revenue Growth was revised from 5.32% to 5.96%, indicating a small uplift in expected top line expansion in the model.
Net Profit Margin was adjusted from 2.75% to 3.31%, pointing to a higher earnings margin assumption on future sales.
Future P/E moved from 17.26x to 15.00x, indicating a lower valuation multiple applied to projected earnings despite the higher fair value estimate.

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Key Takeaways

Strong domestic demand, tariff protection, and OEM reshoring drive higher sales volume, pricing power, and improved profit margins for Cleveland-Cliffs.
Cost reductions, asset sales, and investments in specialty steels enhance financial resilience, market expansion, and support structurally higher earnings.
Reliance on protectionist steel tariffs, legacy blast furnace technology, and high automotive exposure pose structural risks to competitiveness, profitability, and market relevance as industry trends evolve.

Catalysts

About Cleveland-Cliffs

Operates as a flat-rolled steel producer in the United States, Canada, and internationally.What are the underlying business or industry changes driving this perspective?

Sustained enforcement and recent increases of U.S. steel tariffs have materially reduced imports, driving higher domestic demand and pricing power for Cleveland-Cliffs. This, along with reshoring in automotive and appliances, positions the company to benefit from greater sales volumes and improved revenue visibility as protectionist trade policy endures.
OEMs are shifting automotive manufacturing capacity and supply chains back to the United States, accelerating orders for domestically produced steel. Cleveland-Cliffs' underutilized automotive steel capacity and established OEM relationships enable rapid volume ramp-up, directly supporting potential EBITDA growth and net margin expansion as demand recovers.
Strategic footprint optimization, internal coke and feedstock integration, and direct moves to lower fixed costs and SG&A have already resulted in unit cost reductions. Ongoing initiatives are expected to deliver further cost savings, driving enhanced free cash flow, lower leverage, and a structurally higher earnings profile through improved operating margins.
Asset sales and ongoing working capital reductions are set to accelerate deleveraging and unlock latent value. Proceeds from noncore divestitures provide additional flexibility for debt paydown, lowering interest costs and improving both net margins and financial resilience.
New investments in higher-margin stainless and specialty steels, buoyed by infrastructure investment, electrification, and clean-energy buildout, will expand Cleveland-Cliffs' addressable markets and support lasting product mix improvement, increasing revenue growth and supporting higher average selling prices.

Cleveland-Cliffs Earnings and Revenue Growth

Cleveland-Cliffs Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Cleveland-Cliffs's revenue will grow by 6.0% annually over the next 3 years.
Analysts assume that profit margins will increase from -6.4% today to 3.3% in 3 years time.
Analysts expect earnings to reach $743.9 million (and earnings per share of $0.66) by about June 2029, up from -$1.2 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $842.5 million in earnings, and the most bearish expecting $533.2 million.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 15.0x on those 2029 earnings, up from -6.5x today. This future PE is lower than the current PE for the US Metals and Mining industry at 19.7x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 11.28%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Cleveland-Cliffs' long-term competitiveness and cost structure remain heavily dependent on the continued enforcement of Section 232 steel tariffs; any softening, exemptions, or eventual removal of these protectionist trade measures could re-expose the company to global overcapacity and price competition, negatively impacting revenue and net margins.
The company's integrated blast furnace footprint relies on coal, coke, and natural gas, with management confirming the absence of near-term hydrogen-based decarbonization projects; persisting with legacy steelmaking technologies exposes Cliffs to escalating regulatory costs and customer pressures stemming from global decarbonization trends, leading to higher capex requirements and possible demand risks as automotive and industrial clients seek greener alternatives.
Elevated leverage from recent acquisitions is only partially offset by targeted asset sales; if working capital releases and noncore divestitures fall short or market conditions deteriorate, Cleveland-Cliffs' ability to rapidly deleverage and reduce interest burden may be constrained, increasing earnings volatility and risk to free cash flow.
The company faces significant exposure to automotive OEMs, with recovery in volumes and capacity utilization tied to U.S. auto production; any structural shift toward lighter, alternative materials, slow EV adoption rates, or persistent consumer financing challenges could erode steel intensity in vehicles and pressure Cleveland-Cliffs' long-term revenue base and pricing power.
The ongoing shift in the North American steel market towards electric arc furnace (EAF) mini-mills and increased reliance on scrap-based steel threatens Cliffs' market share and profit margins in the long term, as its existing blast furnace operations may become less cost-competitive and require substantial reinvestment to remain relevant in a decarbonizing industry.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $11.6 for Cleveland-Cliffs based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $8.0.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $22.5 billion, earnings will come to $743.9 million, and it would be trading on a PE ratio of 15.0x, assuming you use a discount rate of 11.3%.
Given the current share price of $13.78, the analyst price target of $11.6 is 18.8% lower. Despite analysts expecting the underlying business to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

CLF: Tariff Pressures And New Auto Contracts Will Shape Fair Value Outlook