Alcoa Well-Positioned To Benefit From Positive Pricing Momentum, Analyst Says

Alcoa Corporation AA gets a price target bump from a couple of analysts following better-than-expected first-quarter FY24 results.

Yesterday, the company reported an EPS loss of $(0.81), which beat the consensus loss of $(0.55) and revenue of $2.60 billion, beating the consensus estimate of $2.56 billion.

Alcoa expects alumina production to be 9.8 million and 10 million metric tons and alumina shipments to be 12.7 million and 12.9 million metric tons for FY24.

BMO Capital Markets analyst Katja Jancic raised the price target to $37 (from $35) and maintained the Market Perform rating.

The analyst says Alcoa is well-positioned to benefit from the positive aluminum price momentum and continued multiple actions to deliver profitability improvements over time.

Also, Jancic continues to project that the acquisition of the remaining 40% of Alcoa World Alumina & Chemicals (AWAC) is expected to be beneficial in the longer term, given higher economic interest and simplified structure/greater flexibility.

Last month, Alcoa inked a binding Scheme Implementation Deed to acquire Alumina Limited Alumina Stock AWCMF for $2.2 billion in an all-scrip, or all-stock, transaction. 

Consequently, the analyst estimates EPS of $(0.64) vs. $(0.79) earlier in FY24 and $1.43 (vs $1.61 prior) for FY25.

Also, Jefferies increased the price target to $48 (from $45) and reiterated a Buy rating.

Meanwhile, J.P.Morgan analyst Bill Peterson writes that Aluminum demand continues to improve across markets (ex, Europe construction), which supports firming prices and improved profitability despite ongoing challenges at Warrick, Alumar, and San Ciprian mines.

The analyst estimates an EPS loss of $(1.17) (vs. $0.35 earlier) for FY24 and $2.59 (vs. $3.10 prior) for FY25.

Also, the analyst cut the second-quarter FY24 EBITDA to $245 million (vs. prior $272 million), but expects guided headwinds can be more than offset by improved pricing in both segments (alumina/aluminum +4%/+11% QTD), driving higher earnings Q/Q. 

Also, Peterson cut the EBITDA to $1.0 billion (from $1.1 billion) for 2024.

Investors can gain exposure to the stock via SPDR S&P Metals & Mining ETF XME and Macquarie ETF Trust Macquarie Energy Transition ETF PWER.

Price Action: AA shares are down 0.19% at $35.49 on the last check Thursday.

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