Al Root

United States Steel has become the most surprising hot stock in recent memory.

Everyone seems to want a piece of the company -- everyone except investors that is.

Thursday evening, U.S. Steel reported fourth-quarter earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $190 million. Wall Street was looking for closer to $175 million.

It is a beat, but earnings aren't great. U.S. Steel was earning $1 billion to $2 billion a quarter in 2021 and 2022 when benchmark steel prices were about $1,500 a ton. They are about half that now.

For the first quarter of 2025, U.S. Steel expects Ebitda of about $125 million. Wall Street is looking for about $170 million.

Guidance is weak. Shares aren't doing much though. U.S. Steel stock was up 0.4% in after-hours trading at $36.66 a share. Shares were flat in Thursday trading while the S&P 500 and Dow Jones Industrial Average rose 0.5% and 0.3%, respectively.

U.S. Steel stock doesn't trade on results these days. It's more about politics, politicking, and legal actions.

In August 2023, Cleveland-Cliffs tried to buy U.S. Steel for about $35 a share in cash and stock. Cliffs raised its cash and stock bid to $54 a share, but that was topped by a $55 all-cash offer from Nippon Steel.

Politicians on both sides of the aisle balked at the idea of a Japanese firm owning an American steel company. In March 2024, President Biden said he would oppose the deal on National Security grounds. He formally blocked the deal in January. U.S. Steel is suing to overturn the decision.

In the aftermath of Biden's decision, Cliffs CEO Lourenco Goncalves held a press conference where he implied the best path forward was to merge domestic steel companies together to get the required scale and share to earn consistent profits.

Later in January, activist investor Ancora proposed making "U.S. Steel Great Again in the Public Market," nominating a slate of directors to gain control of the company and oust current management.

Ancora promised to propose a stand-alone strategy for U.S. Steel. How to substantially increase value in a subscale, relatively high-cost commodity producer isn't an easy task. Ancora declined to talk to Barron's.

Cleveland-Cliffs' idea for combination can make sense of the surface. More size and scale can help any commodity producer.

As for Nippon, it is the fourth largest steel maker in the world and is looking to establish a larger U.S. presence. The price offered is dear. U.S. Steel stock hasn't approached $55 since 2010.

Steel is a tough, mature business. U.S. Steel's results show that. Still, U.S. Steel has become a hot property in the industry. What happens to the company and the stock in the long run is anyone's guess.

Through Thursday trading, U.S. Steel stock was down about 24% over the past 12 months. Cliffs shares have done worse, falling almost 50%. The S&P 500 was up about 23%.

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

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 30, 2025 18:06 ET (23:06 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.