Al Root

U.S. Steel stock dropped early Monday after catching a downgrade, losing ground despite the possibility of a windfall in the form of government approval of a sale to Nippon Steel.

The steelmaker's shares were down 1.2% at $42.50 in premarket trading, while S&P 500 and Dow Jones Industrial Average futures fell 1.1% and 0.7%, respectively.

The drop came after BMO Research analyst Katja Jancic downgraded U.S. Steel stock to Hold from Buy. She kept her $45 price target.

Shares have gained 27% over the past three months, making them relatively less attractive. And while a potential $55 a share takeover is still possible, "significant uncertainty remains," wrote Jancic on Monday.

Nippon and U.S. Steel agreed to a $55 per share deal in December 2023, but the transaction faced stiff political opposition from both parties, who felt a company named U.S. Steel should be controlled by Americans. President Joe Biden blocked the transaction on national security grounds, while President Donald Trump has said he favored an investment by Nippon instead of an outright purchase.

Reports that Nippon is trying to convince Trump to allow a buyout just won't go away. "Nippon has apparently spent the last two months working on its bench press, and with its added muscle, it is apparently pitching the White House on an idea where the $55 per share deal moves forward, only it will be juiced by a far higher amount of [Nippon] investment in the U.S.," wrote Gordon Haskett analyst Don Bilson on Friday.

Nippon's U.S. investment could jump to $7 billion, up from prior promises to spend $2.7 billion on plant improvements.

With the downgrade, 42% of analysts covering U.S. Steel stock rate it at Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for U.S. Steel stock is about $42 a share.

Along with the downgrade, Jancic upgraded shares of Steel Dynamics to Buy from Hold. Her price target went to $145 , up from $135. She called the steelmaker "best-in-class" and well-positioned to benefit from price increases resulting from Trump's 25% tariffs on imported steel.

With the upgrade, 56% of analysts who cover the stock rate shares Buy. The average analyst stock price target is about $148.

Despite the upgrade, Steel Dynamics stock was down with the market early Monday. Shares were off 0.9% at $122.88 in premarket trading.

Write to Al Root at allen.root@dowjones.com

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March 31, 2025 09:25 ET (13:25 GMT)

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