For years Cleveland-Cliffs asked investors to trust that a recovery was coming. Last quarter it finally showed one, and then did something it rarely does: it put a specific number on the next quarter, guiding to roughly $575 million of adjusted EBITDA, which would be its best result in three years and about double the $286 million it just reported. That point estimate turns the October 19 report, due before the opening bell, into a clean pass-or-fail exam. Management explained the unusual precision by pointing to the sheer size of the swing. Now it has to deliver it.
Wall Street is looking for earnings of $0.24 a share on revenue of $5.58 billion. That would be a striking turnaround from a $0.45 loss a year ago and a $0.20 loss last quarter, with revenue up about 18% from the prior-year period. The whisper number sits at $0.29, meaningfully above consensus, which suggests the more engaged crowd expects the EBITDA guide to be met or modestly exceeded rather than merely approached. Notably, the revenue estimate implies only about 7% sequential growth from $5.23 billion. With management calling for shipments above 4.3 million tons versus 4.0 million in the second quarter and another $55 per ton of realized price, the top-line bar does not look especially demanding if those operating targets hold.
The ingredients of the guide are where the real scrutiny belongs. Pricing has been the engine, with realized selling prices up $55 a ton in the first quarter and $76 in the second, and management said it had visibility on nearly every ton for the third quarter. Costs are the more fragile piece. Unit costs rose in each of the past two quarters because of outages and inventory lag, so the promised $10 per ton decline is the first real test of the long-promised back-half cost relief. Automotive is the volume story: shipments hit a two-year high, coating volumes returned to 2023 levels, and Cliffs won top-supplier recognition from GM and Toyota. Continued auto strength alongside lower costs would confirm that the three recovery levers management identified, including the end of the money-losing ArcelorMittal slab contract, are compounding rather than fading.
Cash is the other half of the story. Free cash flow turned positive last quarter for the first time in about eight quarters, and management wants leverage below 2.5 times within roughly a year, helped by about $400 million of property sale proceeds expected mostly in the second half. A second straight positive cash quarter would make that deleveraging path credible. Commentary on the roughly $500 million of 2027 EBITDA uplift from resetting fixed-price contracts struck near $800 hot-rolled pricing will also matter, since it underpins the bull case beyond this year. On the other side of the ledger sit Stelco's lagging Hamilton finishing lines, a possible Canadian footprint cut, a cooler POSCO and asset-sale narrative, and ongoing USW contract talks.
The market has already leaned into the turnaround. Shares have climbed nearly 22% since the last report, beating the S&P 500 by more than 16 percentage points, and at $12.98 the stock sits well above its 200-day average and within 2% of its post-earnings high of $13.22. Yet sentiment has grown more bearish than it was a quarter ago, a sign that skepticism persists even as the price rises.
Ultimately, this report hinges on whether that $575 million figure arrives on the back of falling costs as well as rising prices. Hitting it, with a confident fourth-quarter step-up reaffirmed, would cement the shift from promise to proof. Falling short would revive the old doubts just as the stock tests the top of its range.