Cleveland Cliffs Gets Upgraded: Why This Analyst Is Raising The Price Target Ahead Of Q4 Earnings

Steel company Cleveland-Cliffs Inc CLF has seen its shares rise over 30% in the last month.

An analyst is upgrading shares with more upside ahead.

The Cleveland Cliffs Analyst: Morgan Stanley analyst Carlos De Alba upgrades Cleveland Cliffs from Equal Weight to Overweight and raises the price target from $13.60 to $26.

Related Link: Cleveland Cliffs Stock Is Rising With Steel Prices 

The Analyst Takeaways: De Alba is upgrading shares of Cleveland Cliffs due to new contracts and the potential for increased free cash flow.

“We believe the recently announced increase in fixed annual steel price contracts should allow CLF to cope with lower forecast spot steel prices and generate robust FCF yields in the coming years as the company has no major planned capital expenditures,” De Alba said.

The new contracts may not be reflected in consensus estimates for the company’s earnings per share by analysts, he added.

The Cleveland-based company announced an increase of $100 per ton for its automotive customers, which make up its largest end market, De Alba explained. Cleveland Cliffs may also return more cash to shareholders via share buybacks or dividends in the future.

“We believe a near-term catalyst for the stock will be the release of 4Q22 earnings, as historically the company provides guidance for their expected average selling price for the year," he said. "This should provide further clarity and greater confidence to the market on the impact of the increase in the annual fixed price contracts.”

CLF Price Action: Cleveland Cliffs stock is up 7% to $20.56 on Thursday versus a 52-week range of $11.82 to $34.04.

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