First Chicago Corp. shares rose sharply on Tuesday on the strength of an upgrade by S.G. Warburg & Co.

Warburg analyst Francis X. Suozzo boosted First Chicago to a "buy" from a "hold."

He also raised his earnings estimates to $4.20 per share from $4 for this year and to $5.10 from $4.60 for 1994.

The company earned $3 a share last year.

At 3 p.m., First Chicago shares were up 87.5 cents, to 38.125.

Also on Tuesday, First Chicago raised $1 billion through a two-part offering of floating-rate securities backed by credit card receivables.

Mr. Suozzo cited four factors in the upgrade:

* The bank has restructured its earnings mix toward more growth in consumer banking.

* Operating earnings are expected to rise 40% this year and 19% next year.

* First Chicago is rapidly reducing problem assets, particularly through the establishment of an accelerated disposition program for real estate assets.

* The market is likely to revalue First Chicago shares to 10 times earnings from the current figure of around eight as earnings improve. The 10 P-E multiple suggests a price of $51.

Last week, Mr. Suozzo upgraded First Union Corp., Fleet Financial Group, National City Corp., NationsBank Corp., and NBD Bancorp Inc. He noted that the downturn in bank stocks had created value.

|Very Appealing'

Two months earlier, when bank stocks were still rallying, the analyst had downgraded a slew of banks.

"The stock is very appealing on a valuation basis and is well below what it should sell at on a price-earnings basis," said Ronald Mandle of Sanford C. Bernstein & Co. "First Chicago should outperform the market, and that means buy."

But others remained cautious.

"Until the company really changes much more substantially its mix of earnings, the market will value the company on the wholesale banking business that predominates," said Lawrence W. Cohn of Painewebber Inc. And that means a price-earnings multiple closer to the average 8 at which money center banks have historically traded than the 10 that is the norm for regional banks. "You're buying a money center bank, not a regional bank, and we're keeping it on neutral," Mr. Cohn said.

|Buy' Rating for State Street

In another rating decision, Janet McCabe of Legg Mason Wood Walker Inc. said she initiated coverage of State Street Boston Corp. with a "buy."

Ms. McCabe described State Street as an opportunity for "patient" investors.

She added that she did not expect the stock to rebound quickly from a recent selloff.

The stock has fallen 30% since the beginning of April. Investors have sold State Street shares, fearing that competition in securities custody and other specialties of the Boston bank would curb profit growth.

Ms. McCabe set a 15-month price target of $43 on State Street's shares. At 3 p.m., the stock was up 37.5 cents to $32. She set earnings estimates on State Street of $2.25 a share in 1993 and $2.65 in 1994.

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