Why Is U. S. Steel Stock Surging?
United States Steel (NYSE:X) has experienced a stock increase of over 50% so far this year, in contrast to the 1% decline in the S&P 500 Index. The rise in U.S. Steel's stock price is significantly more pronounced compared to its competitors, including VALE (NYSE: VALE), which has increased by 8% year to date, Cleveland-Cliffs (NYSE:CLF), which has decreased by 32% over the same timeframe, ArcelorMittal (NYSE:MT), which is up 33% year to date, and Nucor Corp (NYSE: NUE), which has decreased by 5% during the same period. The rise in U.S. Steel's stock follows President Donald Trump's backing of a strategic collaboration between U.S. Steel and Japan's Nippon Steel.
The suggested $14.9 billion takeover, which was initially obstructed by the Biden administration due to concerns regarding national security, is now being reframed as a 'planned partnership.' With this arrangement, U.S. Steel will keep its headquarters in Pittsburgh, and the U.S. government will continue to hold authority over the company. Nippon Steel intends to invest up to $4 billion in establishing a new steel mill, with the overall agreement projected to generate 70,000 jobs and contribute $14 billion to the U.S. economy within 14 months. For investors seeking potential gains with reduced volatility, the High Quality portfolio has significantly outperformed the S&P 500, delivering over 91% returns since its inception.
Part of the increase observed over the last five months can be attributed to the approximate 2.5% growth in U.S. Steel's revenues, rising from $3.64 billion in Q4 2024 to $3.73 billion in the first quarter of 2025. Nonetheless, the company continued to report losses, with earnings per share worsening to -$0.52 in the most recent quarter, compared to -$0.39 in the final quarter of 2024. Refer to Buy or Fear X.
While U.S. Steel has experienced negative revenue growth in recent years, its P/S multiple has increased. The company's P/S multiple climbed from 0.4 in 2020 to 0.5 in 2024. Currently, the P/S is at 0.6, yet there isa potential downside when comparing the current P/S to levels seen in previous years: 0.3 at the close of 2021 and 0.3 at the end of 2022.
U.S. Steel's recent financial results indicate persistent challenges within the steel industry, characterized by declining earnings and revenue. Revenue reached $3.73 billion in the first quarter of 2025, representing a 10.4% decrease year-over-year. Adjusted EBITDA was reported at $172 million, down from $190 million in Q4 2024. The Adjusted EBITDA in the Flat-Rolled segment tallied at $104 million, a decline of 33% year-over-year due to lower average realized prices and increased energy costs. The company expects adjusted EBITDA for Q2 2025 to fall between $375 million and $425 million, anticipating improvements in the North American Flat-Rolled and Mini Mill segments as seasonal logistics limitations ease and steel prices increase.
President Donald Trump's support for Nippon's acquisition of U.S. Steel has been positively received by investors, as it not only alleviates previous uncertainties but also positions U.S. Steel to become part of the third-largest steel producer globally by volume. The surge in the stock reflects optimism regarding the company's prospects under this new partnership. For further details, refer to our analysis on U.S. Steel's Valuation: Is X Stock Expensive Or Cheap?.
Regulatory risk forms only a minor component of the risk assessment framework we utilize in assembling the Trefis High Quality (HQ) Portfolio which, equipped with a collection of 30 stocks, has demonstrated a track record of significantly outperforming the S&P 500 over the last four years. Why is this the case? As a whole, HQ Portfolio stocks offered superior returns with reduced risk compared to the benchmark index; resulting in less volatility as seen in HQ Portfolio performance metrics.
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