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US Steel gets upgraded by KeyBanc

NEW YORK (AP) -- US Steel was upgraded Thursday by KeyBanc Capital Markets, which predicted that the company will benefit from some higher steel prices and a break on cost of raw materials.

KeyBanc raised its forecast for US Steel's 2014 earnings per share by one-fourth, a far more bullish view than Wall Street overall.

Shares of United States Steel Corp. were up 87 cents, or 2.9 percent, to $30.37 in afternoon trading after rising as high as $31.15 earlier in the session. FactSet says that was its highest level since February 2012.

KeyBanc raised its rating to "Buy" from "Hold." Analyst Philip Gibbs said even though the shares have gained about 16 percent since late October, they can improve further based on his expectation of slightly higher prices for hot-rolled steel this year, easing of raw material costs such as coal, and more signs of economic stability in Europe. He said rising interest rates would also help by reducing the company's pension burden.

U.S. steel use should grow about 3 percent along with the economy, up from flat demand in 2013, Gibbs wrote in a note to clients.

KeyBanc predicted that US Steel will earn $2.05 per share in 2014, up from an earlier forecast of $1.65 per share. Analysts surveyed by FactSet expect the company will earn $1.15 per share.

Citing an outlook of higher costs for iron scrap, the KeyBanc analyst reduced his estimates of 2014 earnings of arc-furnace operators, who make steel from scrap metal. Gibbs lowered his 2014 estimate for Commercial Metals Co. to $1.13 from $1.18 per share; Nucor Corp. to $3 from $3.85 per share; and Steel Dynamics Inc. to $1.35 from $1.75 per share.