KeyBanc Upgrades Cleveland-Cliffs On Opportunities Ahead

Investors seem to be underappreciating the incremental opportunities ahead for Cleveland-Cliffs Inc CLF, according to KeyBanc Capital Markets.

The Cleveland-Cliffs Analyst: Philip Gibbs upgraded Cleveland-Cliffs from Sector Weight to Overweight, while establishing a price target of $12.

The Cleveland-Cliffs Thesis: Estimates across the carbon steel group have been raised to reflect positive inflation and the end of the destocking cycle, Gibbs said.

He expects “more durable and sustainable EBITDA generation” for Cleveland-Cliffs given the economies of scale due to its recent hot-briquetted iron (HBI) production plant, the acquisition of AK Steel Holding, and the pending purchase of ArcelorMittal’s USA assets.

The analyst said the purchase of ArcelorMittal’s USA could drive Cleveland-Cliffs’ stock to between $12 and $16 per share over the next several quarters.

“If the deal does not close, CLF would be nearer fair value, as previously noted,” he wrote in the note.

Gibbs added that “a pending FCFE machine / freight train in the coming quarters” should “allow the company to deleverage.”

CLF Price Action: Shares of Cleveland-Cliffs had risen by 4.6% to $9.30 at the time of publication Friday.