Why Cleveland-Cliffs Stock Is Red-Hot Today

Key Points

• Cleveland-Cliffs reported smaller-than-expected losses this morning.

• Steel prices fell in Q2, but management is cutting costs to mitigate the damage.

• With a little help from President Trump's tariffs, Cleveland-Cliffs could turn profitable again.

• 10 stocks we like better than Cleveland-Cliffs ›

Shares of Cleveland-Cliffs (NYSE: CLF), one of the nation's biggest steelmakers, soared 13.7% through 1:20 p.m. ET Monday after beating on earnings this morning.

Analysts had forecast a rough quarter for Cleveland-Cliffs, with $0.63 per share in losses expected on sales of $4.9 billion. The company nailed the revenue target, and beat on earnings with a loss of "only" $0.50 per share.

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Cleveland-Cliffs' Q2 earnings

Cleveland-Cliffs set a new record for steel shipped in the quarter: 4.3 million net tons, up 7.5% from a year ago. Average selling prices on that steel, however, slid 10%, turning what should have been a revenue improvement into a decline -- and turning its gross profit margin negative.

On the bottom line, Cleveland-Cliffs ended up with $470 million in net losses, or $0.97 per share, reversing the tiny profit it earned in Q2 2024.

Is Cleveland-Cliffs stock a buy?

But if Cleveland-Cliff's news was so bad, why are investors buying the stock? Partly because management said $323 million of its net loss -- about 69% -- came from "previously disclosed non-recurring charges related to idled facilities." And partly, because management says it's making progress cutting both costs and inventories.

Turning to guidance, Cleveland-Cliffs notes that it's on track to cut its 2025 cost of production by about $50 a ton in comparison to 2024 -- enough to offset about half the decline in steel prices seen in Q2. Combined with reductions in capital spending and in selling, general, and administrative expenses, plus the absence of the "non-recurring charges" that hurt Q2 results, and of course the benefits Cleveland-Cliffs might enjoy from Trump administration tariffs on imported steel, there's every chance profits will perk back up soon.

Management didn't quite promise this, mind you. But investors seem to be betting on it.

Should you invest $1,000 in Cleveland-Cliffs right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.