The firm has a $34 price target on shares of the Chicago-based manufacturer and distributor of building materials.
The upgrade reflects the stock's improving risk and reward profile.
"A smart asset sale, a stronger balance sheet, and internal investment opportunities that should drive margin expansion coupled with an attractive valuation support our outperform recommendation," RBC Capital wrote in an analyst note.
The sale of USG's distribution business to ABC Supply for $670 million was "smart," according to the firm.
"It simplifies the story because USG will revert to being a pure play OEM with leading North American market shares in wallboard and ceilings," RBC Capital noted.
Additionally, the sale enhances margin performance as the distribution segment was less profitable and eliminates channel conflict with many competitors.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on the stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations.
But the team also finds weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and poor profit margins.
You can view the full analysis from the report here: USG