Steel producer AK Steel (AKS) is set to prosper from rising demand for durable goods. The Ohio company is primed for a U.S. economic recovery, having squeezed costs and become vertically integrated.

AK Steel makes flat-rolled carbon, electrical and stainless steels. It operates in highly cyclical industries, though, such as automotive, appliance, construction and manufacturing. However, automobile sales are in a growth spurt, set to rise to 13.5 million units in 2012 from 12.7 million last year, according to S&P.

For fourth quarter 2011, AK Steel reported sales of $1.5 billion, up from $1.3 billion in 2010.

Net income for the quarter was a loss of $1.76 per share, versus an 89 cent loss the year before. For full-year 2011, the company reported sales of $6.4 billion, up from $5.9 billion in 2010. Net income for 2011 was a $1.41 per share loss, steeper than the $1.17 loss a year ago.

Analysts see positive earnings for AK Steel in 2012, though. The consensus earnings estimate is 75 cents per share. For 2013, the earnings estimate is $1.32.

Pricing power ahead

Stronger steel sales and higher prices will propel AK Steel’s revenues 12.8 percent in 2012, say S&P analysts. AK Steel’s earnings will be boosted by greater pricing power, as the industry continues to consolidate, analysts believe. The company already targets high-margin products.

Some have mixed opinions on AK Steel, though. Of the 18 analysts followed by Thomson/First Call, one has a buy recommendation and six have buys, with eight holds and three underperforms.

S&P analysts have a buy rating on AK Steel, citing sizable spending cuts, which could boost earnings.

The company next reports on April 26.