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Alcoa shares target lifted, rating maintained by B.Riley on strong earnings

EditorNatashya Angelica
Published 07/18/2024, 11:55 AM
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On Wednesday, B.Riley raised the stock price target for Alcoa Corporation (NYSE:AA) shares to $43.00, an increase from the previous target of $39.00, while maintaining a Neutral rating. The adjustment followed Alcoa's second-quarter adjusted EBITDA report, which surpassed both B.Riley's and FactSet consensus estimates.

The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter, excluding special items, reached $325 million, compared to the $277 million estimated by B.Riley and the consensus of $282 million.

Alcoa's performance was underpinned by robust aluminum shipments totaling 677k metric tons, outpacing B.Riley's projection of 609k metric tons. Additionally, third-party alumina shipments exceeded expectations, coming in at 2,267k metric tons versus the anticipated 2,002k metric tons. The company had previously announced these stronger-than-expected results last week.

The company is currently concentrating efforts on finalizing the acquisition of Alumina (OTC:AWCMY) Limited, with the closure expected to proceed smoothly towards the target date of August 1. Alcoa has also made significant progress in its profitability improvement program, achieving a $350 million run-rate to date and aiming for an additional $295 million in the second half of the year and throughout 2025.

While final bids are being collected for the potential sale of San Ciprian, the company acknowledges that tough decisions may be necessary if the sale or asset optimization does not come to fruition. Investors' attention is drawn to Alcoa's potential earnings throughout market cycles, bolstered by these ongoing improvements.

In light of the recent financial results, B.Riley has slightly adjusted its third-quarter adjusted EBITDA estimate for Alcoa from $437 million to $427 million. Despite the positive momentum, the firm's stance remains Neutral, with the price target now set at $43.

In other recent news, Alcoa Corporation has seen significant developments in its financial performance and strategic moves. The company reported flat revenues of $2.6 billion and a net loss of $252 million in its recent earnings call. Despite these figures, Alcoa's cash balance rose to $1.4 billion, supported by a $750 million green bond issuance.

Analysts from B.Riley, Morgan Stanley, and Citi have updated their outlooks on Alcoa. B.Riley increased its price target for Alcoa shares to $39.00, maintaining a Neutral rating. Morgan Stanley upgraded Alcoa's stock from Equalweight to Overweight and raised the price target to $50.00. Citi also increased Alcoa's stock price target to $50.00, maintaining a Buy rating.

In terms of strategic moves, Alcoa is nearing the final stages of its acquisition of Alumina Limited, a transaction expected to enhance its position in the aluminum industry. The company also announced a revised acquisition agreement with Alumina Limited, moving closer to finalizing the transaction expected to conclude in the third quarter of 2024.

These are recent developments for Alcoa, a company that continues to navigate cyclical trends in the metals market and make strategic moves to strengthen its position.

InvestingPro Insights

Alcoa Corporation's (NYSE:AA) latest earnings report and B.Riley's subsequent price target increase reflect a company navigating through market challenges with some degree of success. To provide further context, InvestingPro data reveals a market capitalization of $6.61 billion, underscoring the significant scale of Alcoa's operations.

While the company's P/E ratio stands at -9.88, indicating that investors are expecting future growth or a return to profitability, the adjusted P/E ratio for the last twelve months as of Q1 2024 is even lower at -14.36, reflecting increased skepticism about near-term earnings potential.

InvestingPro Tips suggest that analysts have recently revised their earnings upwards for the upcoming period, hinting at a cautiously optimistic outlook. Still, they also point out Alcoa's challenges, including weak gross profit margins of 7.34% and the expectation that the company will not be profitable this year. Despite these concerns, the company has experienced a large price uptick over the last six months, with a 38.44% total return, which may attract investors looking for growth in share price.

For those considering an investment in Alcoa or seeking to deepen their analysis, InvestingPro offers additional tips on the company's financial health and future prospects. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, gaining access to valuable insights that could shape investment decisions. With several more InvestingPro Tips available, investors can equip themselves with a comprehensive understanding of Alcoa's position in the market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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