Why Is U. S. Steel Stock Surging?

U.S. Steel's stock has surged over 50% year-to-date, contrasting with declines in the S&P 500 and some competitors, driven by President Trump's support for Nippon Steel's $14.9 billion acquisition, now framed as a partnership. The deal, initially facing regulatory hurdles, promises a $4 billion investment in a new mill, creating 70,000 jobs and contributing $14 billion to the U.S. economy. Despite revenue growth to $3.73 billion in Q1 2025, U.S. Steel continues to report losses, with EPS worsening to -$0.52, although the company anticipates improved EBITDA in Q2 2025.

Analysis

United States Steel (X) has demonstrated significant stock appreciation, rising over 50% year-to-date, starkly outperforming the S&P 500's 1% decline and most steel industry peers such as Cleveland-Cliffs (CLF, -32% YTD) and Nucor (NUE, -5% YTD), though ArcelorMittal (MT) also saw a strong 33% increase. This surge is primarily attributed to President Donald Trump's endorsement of a revised strategic collaboration with Japan's Nippon Steel, a $14.9 billion proposed takeover now framed as a "planned partnership." This development appears to mitigate previous national security concerns raised by the Biden administration, with the deal promising U.S. Steel's headquarters will remain in Pittsburgh, U.S. government oversight, a $4 billion investment by Nippon for a new mill, and projections of 70,000 jobs and a $14 billion economic contribution within 14 months. Despite this M&A-driven optimism, U.S. Steel's recent financial performance presents challenges. While Q1 2025 revenues increased marginally to $3.73 billion from $3.64 billion in Q4 2024, this represented a 10.4% decrease year-over-year. The company continued to report net losses, with earnings per share worsening to -$0.52 in Q1 2025 from -$0.39 in Q4 2024. Adjusted EBITDA also declined to $172 million in Q1 2025 from $190 million in the prior quarter, with the Flat-Rolled segment's Adjusted EBITDA falling 33% year-over-year to $104 million due to lower prices and higher energy costs. The company's P/S multiple has expanded to 0.6, up from 0.5 in 2024 and 0.4 in 2020, and notably higher than the 0.3 levels seen at the end of 2021 and 2022, suggesting the market is pricing in significant future improvements or deal success. U.S. Steel anticipates adjusted EBITDA for Q2 2025 to be between $375 million and $425 million, expecting an uplift from easing seasonal logistics and rising steel prices.

Key Decisions for Investors

• Investors should closely monitor developments regarding the Nippon Steel partnership, as its successful consummation is the primary catalyst for the recent stock outperformance and is critical to sustaining current valuation levels.
• Given the stock's substantial appreciation driven by M&A news, juxtaposed with continued operational losses (EPS -$0.52 in Q1 2025) and a year-over-year revenue decline of 10.4%, investors should carefully assess the risk-reward profile, particularly if there are delays or obstacles to the deal.
• The Q2 2025 adjusted EBITDA guidance of $375-$425 million will be a key test of underlying business improvement; failure to meet this target could pressure the stock, especially as the current P/S multiple of 0.6 is elevated compared to recent historical levels.