Why Are Analysts Turning Around for Cleveland-Cliffs?

Analysts’ ratings

According to Thomson Reuters, 73.0% of the analysts covering Cleveland-Cliffs (CLF) stock recommend a “buy,” 27.0% recommend a “hold,” and there were no “sell” ratings. CLF’s target price of $11.90 implies an upside of 21.0% based on its current market price. At the end of March, Cleveland-Cliffs had “buy” ratings from only 30.0% of the analysts.

The analysts covering the company have demonstrated a significant turnaround due to its positive growth outlook. Other positive factors include the overall improvement in the US steel sector’s dynamics following the imposition of tariffs. For a detailed analysis of this topic, please read Revisiting the Case: How Does Cleveland-Cliffs Look Now?

Why Are Analysts Turning Around for Cleveland-Cliffs?

ArcelorMittal (MT) has the most “buy” ratings among its steel (SLX) peers, as 100.0% of the analysts are bullish on its stock. Nucor (NUE) follows with 80.0% “buy” ratings. Steel Dynamics (STLD) has 71.0% “buy” ratings, U.S. Steel Corporation (X) has 56.0% “buy” ratings, and AK Steel (AKS) has 36.0% “buy” ratings.

Six upgrades in 2018

CLF’s latest rating change came on July 23, when J.P. Morgan (JPM) upgraded the stock from “neutral” to “overweight.” JPM analyst Michael Gambardella also raised the stock’s target price by 67.0% from $9.00 to $15.00.

As The Fly reported, Gambardella cited CLF’s “strong” US iron ore earnings momentum and the removal of the overhang with the sale of its Asia-Pacific unit. He’s incrementally more positive about CLF stock after the company’s second-quarter results. With this upgrade, Cleveland-Cliffs stock has seen six upgrades (including “buy” initiations) in 2018.

You can also see What to Look Forward to in Cleveland-Cliffs’ Q2 2018 Results for a detailed look at the stock’s recent rating changes.

On June 6, Citigroup (C) analyst Daniel Knauff initiated coverage of Cleveland-Cliffs (CLF) stock with a “buy” rating and a target price of $11.00. Knauff thinks that Cliffs has “significant logistical, quality and cost advantages” to supply iron ore pellets to US steel companies.

Knauff also noted that domestic market dynamics have improved. Knauff also likes Cleveland-Cliffs because it’s the only major independent supplier of iron ore pellets to the domestic market. Also, CLF has secured its revenues through long-term, partially fixed pricing contracts.

Other rating and target price changes

On July 27, Morgan Stanley reaffirmed its “equal-weight” rating on the stock and increased its target price from $8.00 to $10.00. Citi boosted CLF’s target price from $11.00 to $12.00 on July 23.

Hedge fund managers have also started noticing CLF. To learn more, please read Dalio and Other Money Managers are Turning to Cleveland-Cliffs.