Cleveland-Cliffs has a much brighter earnings forecast, and I’d like to meet the assumptions doing the heavy lifting. Preferably before we give next year’s profits a chair at this year’s table.
The steelmaker’s October 19 results show a genuine recovery. But the most interesting page is in the accompanying presentation: a bridge from one improved quarter to a much larger 2027 earnings figure. Some of that bridge rests on new contract terms. Another substantial piece depends on steel-price forecasts. For investors, separating those pieces is more useful than treating the whole thing as money already waiting to be collected.
The recovery has numbers behind it
Cleveland-Cliffs reported $5.6 billion in third-quarter revenue and $152 million in GAAP net income attributable to its shareholders, or $0.26 per diluted share. Adjusted earnings were $0.28 per share. Its earnings release puts adjusted EBITDA at $612 million, compared with $286 million in the second quarter. This non-GAAP measure adjusts earnings for interest, taxes, depreciation and other specified items. All dollar figures here are U.S. dollars.
That improvement deserves credit. Steelmaking shipments rose to 4.15 million net tons from 4.025 million in the second quarter, while average selling prices increased to $1,177 per net ton from $1,124. More steel going out at better prices is a useful combination.
Management forecasts roughly $715 million in fourth-quarter adjusted EBITDA. It expects pricing to help, partly offset by seasonality, maintenance outages, input costs and incentive compensation. The expenses, apparently, haven’t agreed to take the holidays off.
Meet the $1.1 billion assumption
The release says 2027 adjusted EBITDA could exceed $4 billion based on contract changes and prevailing price forecasts. Slide 10 of the company’s presentation goes further, offering an explicitly illustrative bridge to approximately $4.5 billion:
- Start with about $2.45 billion, annualizing third-quarter adjusted EBITDA.
- Add $350 million from lower discounts and increased extras on index-linked contracts.
- Add $850 million from fixed-price contract resets.
- Add $1.1 billion from prevailing price forecasts.
- Subtract $250 million for inflation and other cost impacts.
The pricing footnote matters. That $1.1 billion reflects the current futures curve and Canadian order book. It isn’t all a fixed-price customer commitment. Equally, the contract improvements aren’t imaginary simply because another component is less certain.
I’d track the two separately. New terms can improve what Cliffs earns at a given market price; a favorable market-price assumption asks the outside world to cooperate. If steel prices weaken, investors will want to know how much protection the contract changes actually provide.
Annualizing one quarter is also a starting point for this illustration, not a prediction that four identical quarters will obligingly arrive. Management’s own fourth-quarter offsets show why the calendar matters.
There’s a cash-flow forecast, too
The same slide deducts roughly $1.8 billion for interest expense, capital expenditure and pension/postretirement payments, arriving at estimated 2027 free cash flow of about $2.7 billion. That is management’s illustrative forecast, not cash already generated. Cliffs also says it cannot reconcile its fourth-quarter 2026 and full-year 2027 adjusted EBITDA outlook to GAAP net income without unreasonable effort because certain items cannot be reliably predicted.
For a current checkpoint, the cash-flow statement accompanying the release shows $224 million of third-quarter operating cash flow and $152 million of capital spending. Subtracting the latter gives $72 million. Across the first nine months, the same calculation is $129 million minus $461 million, or negative $332 million.
Those are simple operating-cash-flow-minus-capex calculations, in U.S. dollars. The positive quarter is progress; the nine-month shortfall shows why extrapolating deserves care. Receivables, inventory and payables also move cash between periods, so a modest quarter’s conversion doesn’t by itself establish poor earnings quality.
What would make the debt story more convincing?
Cliffs targets net debt below 2.5 times trailing-12-month adjusted EBITDA by mid-2027. Its presentation reports roughly $500 million of asset sales under contract or closed, with about $130 million received, and says net proceeds are intended for debt repayment. Selling an asset can help the balance sheet, but it isn’t recurring cash from selling steel.
There’s an operational wrinkle worth keeping beside the upbeat forecast: Cliffs is indefinitely idling Stelco’s galvanizing lines. Management expects a hot-rolled focus to maintain total Stelco tonnage and improve its EBITDA contribution. That expectation needs checking as the mix changes.
My next-report checklist would be specific: realized pricing after the contract resets, cash remaining after capital spending, and actual debt repayments separated from asset-sale proceeds. Our guide to reading an earnings report explains how those measures fit together. Here, the recovery is visible. The much bigger 2027 payoff still has assumptions to earn its way through.
Analysis based on information available October 19, 2026, at 8:30 a.m. Central. Company forecasts are not guarantees.