Aluminum Giant Alcoa Gains Tax Credit Momentum In Q4 Amid Brazilian Asset Adjustments

Alcoa Corp AA updated its guidance as the U.S. Treasury Department's disclosed guidance on Section 45X of the Advanced Manufacturing Tax Credit.

The Advanced Manufacturing Tax Credit was enacted as a part of the Inflation Reduction Act (IRA).

Consequently, in Q4, the company expects to record a benefit in cost of goods sold of $35 million-$40 million (after-tax), or $0.20-$0.22 per share related to its Massena smelter in New York and its Warrick smelter in Indiana. 

As requested in the notice, Alcoa plans to submit written comments to Treasury regarding the definition of production costs. 

Unrelated to the development, the company disclosed recording a valuation allowance on certain deferred tax assets in Brazil, which is expected to result in a charge-to-tax expense of $140 million-$150 million, or $0.78-$0.84 per share. 

Of this charge, around $100 million or $0.56 per share is discrete and projected to result in a net loss of $40 million-$50 million or an impact to adjusted loss per share of $0.22- $0.28 in Q4 2023.

In October, Alcoa reported quarterly losses of $1.14 per share, which missed the analyst consensus estimate of losses of $1.13, compared to EPS losses of $0.33 from the same period last year. 

During the earnings announcement, Alcoa stated Q4 operational tax expense guidance of about $10 million to $20 million.

Price Action: AA shares are trading higher by 0.43% at $30.65 premarket on the last check Tuesday.

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