Cleveland-Cliffs higher fixed pricing contracts should lead to positive revisions, claim analysts

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By Sam Boughedda

Cleveland-Cliffs (NYSE:CLF) was upgraded to Overweight from Equal-Weight, with its price target raised to $26 from $13.60 per share by Morgan Stanley.

Analysts there told investors in a note Thursday that the upgrade was based on sequentially higher annual fixed pricing contracts. They feel these "should lead to positive earnings revisions and robust FCF generation despite forecast declining spot steel price."

"In addition, we believe that sell-side consensus estimates are not fully reflecting the announced increased in annual fixed price contracts, which in our view will lead to positive 2023 earnings revisions and result in further tailwinds for the stock," added the analysts.

Furthermore, Morgan Stanley sees a near-term catalyst for the stock being the release of its fiscal fourth-quarter earnings, as "historically the company provides guidance for their expected average selling price for the year."

"This should provide further clarity and greater confidence to the market on the impact of the increase in the annual fixed price contracts," the analysts added.

Following the upgrade, CLF shares jumped more than 8% on Thursday.