On Thursday, BMO Capital Markets adjusted its outlook on Alcoa Corp (NYSE:AA) shares, a leading producer of aluminum, by increasing its price target from $42.00 to $45.00, while maintaining a Market Perform rating. This revision follows Alcoa's third-quarter results for 2024, which exceeded expectations.
The firm's decision to raise the price target is based on the reassessment of near-term estimates after marking-to-market alumina prices. The current alumina pricing environment is favorable, and Alcoa is expected to see its results improve further in the fourth quarter of 2024. This optimistic forecast comes after Alcoa's acquisition of Alumina (OTC:AWCMY) Limited, which significantly increased its third-party alumina sales potential from 2 million tons per year (mtpy) to 6 mtpy.
Alcoa's strategic and operational progress has been noted as a contributing factor to the positive outlook. The company has been actively working on several initiatives, including profitability improvement programs, securing bauxite mining permits in Western Australia, advancing the sale of its stake in the Ma'aden joint venture, and resolving issues at its San Ciprián facility.
The analyst from BMO Capital Markets highlighted these developments, stating, "Alcoa continues to make progress on multiple key strategic/operational actions." These actions, coupled with the strong pricing environment for alumina, underpin the firm's decision to increase the target price for Alcoa shares to $45.00.
In other recent news, Alcoa Corporation showcased a robust performance in the third quarter, with its net income rising to $90 million, a significant increase from $20 million in the previous quarter.
Moreover, the company's adjusted EBITDA also saw a substantial rise, reaching $455 million, surpassing both B.Riley's projection and the FactSet consensus. Alcoa also successfully completed the acquisition of Alumina Limited, which is expected to enhance its market position.
Furthermore, B. Riley upgraded Alcoa's stock from Neutral to Buy, reflecting the company's successful implementation of profitability savings programs and the advantageous high alumina prices. The firm has also revised its forecast for Alcoa's 2025 adjusted EBITDA, increasing the estimate from $1,764 million to $2,412 million.
In strategic moves, Alcoa plans to sell its 25.1% stake in Ma'aden joint ventures and has also entered into a partnership with IGNIS Group for its Spanish operations. The company has increased its Q4 alumina shipment outlook to 12.9-13.1 million tons.
On the financial front, Alcoa aims to reduce its adjusted net debt of $2.2 billion, with a focus on productivity and strategic initiatives. The company is also working towards obtaining Western Australia mining approvals by early 2026, with potential operations starting in 2027. These recent developments highlight Alcoa's proactive approach towards leveraging market conditions and strategic initiatives.
InvestingPro Insights
Recent data from InvestingPro adds depth to the analysis of Alcoa Corp (NYSE:AA). The company's market capitalization stands at $10.87 billion, reflecting its significant presence in the aluminum industry. Alcoa's revenue for the last twelve months as of Q2 2024 was $10.7 billion, with a quarterly revenue growth of 8.27% in Q2 2024, aligning with the positive outlook mentioned in the article.
InvestingPro Tips highlight that Alcoa's stock price has shown strong returns, with a 53.57% total return over the past year and a 23.84% return in the last month. This performance supports BMO Capital Markets' decision to raise the price target. Additionally, analysts predict that Alcoa will be profitable this year, which could be linked to the company's strategic actions and the favorable alumina pricing environment discussed in the article.
It's worth noting that InvestingPro offers 11 additional tips for Alcoa, providing investors with a more comprehensive analysis of the company's financial health and market position.
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