Cleveland-Cliffs' Q4 Losses Persist, Turnaround Remains Fragile Amid High Leverage

What happened

Cleveland-Cliffs reported fourth-quarter 2025 results with steel shipments of 3.8 million net tons, but posted a GAAP net loss of $235 million and an adjusted net loss of $0.43 per share. Revenues were $4.3 billion, consistent with the prior-year quarter, yet persistent losses highlight ongoing margin pressure despite management's cost-cutting and idling initiatives. This follows a sequential improvement in Adjusted EBITDA from negative in Q1 2025 to positive in Q3, but full-year 2025 still shows significant net losses and negative operating cash flow, underscoring the fragile nature of the recovery. Liquidity of $3.3 billion provides a near-term buffer, but it does not address the core issues of high leverage and unsustainable cash burn. The results confirm that operational fixes and tariff tailwinds have not yet translated into meaningful profitability, leaving the turnaround thesis unproven.

Implication

The Q4 results validate the DeepValue report's concerns, showing that Cleveland-Cliffs is still struggling to achieve profitability despite sequential improvements and tariff support. Persistent net losses and negative operating cash flow indicate that cost savings from idlings and Stelco synergies are insufficient to overcome weak pricing and high interest expenses. With liquidity providing only a temporary cushion, the company remains vulnerable to further dilution or asset sales if cash flow does not turn positive soon. Investors must monitor 2026 guidance for evidence of sustainable EBITDA recovery and debt reduction, as the current valuation already discounts a successful turnaround. Until clear signs of self-funded deleveraging emerge, maintaining a patient stance is prudent to avoid capital impairment in this highly leveraged, cyclical play.

Thesis delta

The Q4 results do not shift the investment thesis, as they align with the DeepValue report's view of a fragile turnaround with no material progress towards sustained profitability. This reinforces the 'WAIT' rating, emphasizing that the thesis remains unchanged until Cleveland-Cliffs demonstrates consistent positive operating cash flow and reduced net debt, as outlined in the report's key checkpoints.