Cleveland-Cliffs Beat Estimates. It Still Lost $229 Million.

The quarter

Revenue came in at $4.92 billion, surpassing the $4.81 billion consensus estimate and representing a $600 million increase from the prior quarter. Adjusted EBITDA was $95 million, above the $92 million Wall Street had penciled in and a dramatic improvement from the negative $179 million EBITDA recorded in the first quarter of 2025.

But the company still posted a GAAP net loss of $229 million, or $0.42 per diluted share. On an adjusted basis, the loss was $0.40 per share, which beat the consensus estimate of a $0.44 loss. That marks the fourth consecutive quarter of adjusted EPS estimates being beaten, and the fourth consecutive quarter of net losses.

Management attributed an $80 million headwind to a one-time energy cost spike driven by extreme cold weather. Without that charge, adjusted EBITDA would have been $175 million: a number that would have looked considerably more encouraging.

Pricing power vs. margin compression

The bright spot in the quarter was pricing. Cleveland-Cliffs' average net selling price per ton of steel rose to $1,048, up 7 percent from $980 a year ago and up 5.5 percent from $993 in the fourth quarter. Shipments also improved sequentially, rising to 4.1 million net tons from 3.77 million in Q4 (though essentially flat year over year from 4.14 million).

The problem is on the cost side. Cash cost of goods sold was $4.62 billion, virtually unchanged from the year-ago quarter despite the revenue increase. The steelmaking segment posted a negative gross margin of $95 million: an improvement from the negative $405 million a year earlier, but still deeply in the red. Net margins for the trailing twelve months sit at negative 7.9 percent, and return on equity is negative 21.6 percent.

In other words: tariffs are lifting prices, but Cleveland-Cliffs' cost structure is consuming the benefit.

The tariff tailwind

CEO Lourenco Goncalves said on the earnings call that "trade enforcement in the United States is working exactly as intended, with steel imports at their lowest levels since the global financial crisis." Hot-rolled coil prices are currently around $1,100 per ton, up from below $700 before the administration imposed 25 percent tariffs on imported steel and aluminum in early 2025.

To be sure, the tariff regime has been a genuine positive for domestic steelmakers. Import volumes have fallen sharply, and the April update to the tariff structure (which now applies a flat 25 percent levy on the full value of products made substantially from steel, aluminum, or copper) has further insulated domestic producers. But the benefits have accrued unevenly. Nucor (NYSE: NUE) and Steel Dynamics (NASDAQ: STLD), both of which operate primarily with electric arc furnaces and lower fixed-cost structures, have remained profitable through the cycle. Cleveland-Cliffs, with its vertically integrated blast furnace model and heavy legacy cost base (including approximately $1.1 billion in annual depreciation and $125 million in pension obligations), has not.

The POSCO question

Goncalves also addressed the company's ongoing negotiations with POSCO Holdings (NYSE: PKX), the South Korean steelmaker with which Cleveland-Cliffs signed a memorandum of understanding for a potential transaction. "Ongoing disruption in the Middle East has made Cliffs' competitive position stronger and underscores why global steel producers want to partner with Cleveland-Cliffs," he said, while acknowledging that "the current situation has not helped the timeline of a potential deal."

The POSCO deal matters because it represents a potential path to deleveraging. Cleveland-Cliffs' total debt-to-equity ratio stands at 126 percent, with an enterprise value of $11.7 billion against a market capitalization of just $5.6 billion. The company held $3.1 billion in liquidity as of March 31, but only $57 million of that was cash. Any transaction that brings in outside capital or restructures the balance sheet would be meaningful. But Goncalves offered no timeline, and the market appears to have priced in skepticism.

Guidance and the path forward

Management maintained its full-year 2026 guidance: shipment volumes of 16.5 to 17.0 million net tons, capital expenditures of approximately $700 million, and SG&A of approximately $575 million. Goncalves said the company expects to generate "healthy positive free cash flow in the second quarter," calling it "a return to the earnings and cash-generation profile this company is capable of delivering."

Wall Street is cautious. Of 43 analysts covering the stock, 10 rate it a Buy, 22 a Hold, and 11 a Sell. The median price target is $14, which implies roughly 43 percent upside from current levels. But the consensus estimate for the next quarter is an EPS of negative $0.01 on $5.25 billion in revenue: essentially breakeven, not a recovery.

The steel industry ranked in the bottom 16 percent of the Zacks Industry Rank as of the earnings release, per Zacks Investment Research. Cleveland-Cliffs has the tariff environment it lobbied for. What it does not yet have is the margin structure to turn that environment into profits. Only time will tell whether sequential improvement materializes as Goncalves promises, but four consecutive quarters of net losses offer little basis for taking the guidance at face value.