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Cleveland-Cliffs Breaks to New Highs on Earnings, More Upside?

Written by Gabriel Osorio-Mazilli. Published 10/26/2025.

One of the most overlooked corners of the U.S. economy—the basic materials sector—just reminded investors why it’s worth watching. Shares of Cleveland-Cliffs Inc. (NYSE: CLF) jumped more than 24% in a single session after the company reported earnings.

The stock was already depressed before the rally, offering an attractive risk-to-reward profile. Now that CLF has reached a new 52-week high, investors are asking whether there is further upside. Looking at industry dynamics helps frame that question.

Stepping back from Cleveland-Cliffs specifically, one technical reason for additional gains could be the performance gap between the S&P 500 and the Materials Select Sector SPDR Fund (NYSEARCA: XLB). That gap leaves room for materials-sector names to run higher in the months ahead, especially if the broader economic backdrop continues to act as a tailwind.

Breaking Down the Cleveland-Cliffs Quarter

Bears pointed out that Cleveland-Cliffs reported lower volume and revenue: the company delivered 4.0 million net tons and generated $4.7 billion in revenue, down about 4% from $4.9 billion a year earlier. Still, the composition of revenue has shifted in a way that helps explain the rally.

The company’s sales are moving toward infrastructure and automotive projects, a shift tied in part to tariffs on foreign-assembled vehicles and imported steel. Rather than producing a sharp domestic slowdown as some feared, those policies encouraged manufacturers to source more steel from domestic producers such as Cleveland-Cliffs to avoid tariff-related costs.

CEO Lourenco Goncalves said in the earnings release that all major original equipment manufacturers (OEMs) have signed multi-year agreements naming Cleveland-Cliffs as a primary supplier. Those contracts boost the company’s pricing power and secure a more predictable revenue stream going forward.

The firm reported net liquidity of $3.1 billion for the quarter, strengthening the balance sheet and positioning Cleveland-Cliffs to capitalize on an industry rebound. As operational strength translates into better pricing and margins, the company could begin to command a premium relative to peers.

How Markets Feel About Cleveland-Cliffs Now

After a period in bear-market territory, many investors may be reluctant to stay bearish given the stock’s momentum and improving fundamentals. Large institutions are taking notice: State Street increased its stake in Cleveland-Cliffs by 20.2% in August 2025, bringing its position to about $208.6 million.

Those institutional purchases aren’t the only signal. The stock now trades at a price-to-book (P/B) ratio near 1.2x, roughly a 41% premium to the steel industry average P/B of about 0.84x. Some investors may view that premium as a sign the stock is relatively expensive, while others see it as the market rewarding consistent outperformance.

Markets often assign higher valuations to companies that outperform both their peers and the broader S&P 500—a pattern Cleveland-Cliffs has exhibited in recent quarters.

Looking ahead, expectations for a meaningful rebound remain elevated. With multi-year supply agreements in place, growing demand from infrastructure and automotive customers, and policy-related tailwinds from tariffs, Cleveland-Cliffs appears positioned to improve profitability. Becoming a go-to supplier for major OEMs and a key participant in U.S. infrastructure projects gives the company a platform for sustainable revenue growth and margin expansion.