BofA Upgrades Alcoa On More Positive Aluminum Outlook

Alcoa Corp AA seems poised for an earnings beat in the back half of the year given an improved aluminum outlook, according to BofA Securities.

The Alcoa Analyst: Timna Tanners upgraded Alcoa from Neutral to Buy and raised the price target from $14 to $17.

The Alcoa Thesis: Aluminum prices could benefit from low interest rates and a recovery in China’s economy, Tanners said in the Tuesday upgrade note.

“While the global aluminum market was oversupplied in H1E, the surplus is less relevant now that demand has begun to rebound and extra material has been locked up in financing deals," the analyst said.

"We have gotten more positive on aluminum, but believe investors may have overlooked it in favor of copper and iron ore." 

August data from China, the world’s largest consumer and producer of aluminum, indicates improved conditions, she said. 

Alcoa shares are a less expensive way than copper and gold peers for investors to gain exposure to strength in commodities, low interest rates and strong demand from China, according to BofA. 

AA Price Action: Alcoa shares were down 1.67% at $14.16 at last check Tuesday.