U.S. Steel (NYSE:X) Up On Goldman Sachs (NYSE:GS) Upgrade

After Goldman Sachs (NYSE:GS) analyst Sal Tharani upgraded U.S. Steel (NYSE:X) from “neutral” to a “buy,” U.S. steel surged 2 percent quickly reach over $60 a share.

Along with the upgrade, Tharani increased the price target for shares in the company significantly, raising them from $55 to $70.

The reasoning behind the upgrade was the recent increase in scrap steel costs in the industry, which U.S. Steel is best positioned to take advantage of, which will be done by increasing prices as a result.

According to Tharani, fixed-investment companies like U.S. Steel and others in the industry, reach the break-even point when their capacity is at 70 percent, which means profits are expected to follow soon, as U.S. Steel and others are approaching that capacity quickly, and are ready to turn a profit going forward.

Therani stated: “Raw material prices continue to move up with scrap now in the lead and likely soon to be followed by higher iron ore and coking coal prices, which could provide support for higher steel prices.”

The largest division of U.S. Steel is its Flat Rolled unit, which is expected to be profitable starting in the second quarter of 2010, according to the Goldman analyst.

For the short term, analysts in general are looking for a small loss in 2010 for U.S. Steel, and in 2011 are expecting a solid profit of about $5.18 a share.

Tharani is a little more optimistic, looking at profits of 30 cents a share for 2010, and is close to the same for 2011, believing price per share will reach $5.50, with 2012 getting even better, increasing to $7.50 a share. Those numbers are up from a previous estimate.