Alcoa (AA) has its share of doubters. Moody’s just moved its credit outlook on the company from stable to negative. RBC downgraded the stock to "underperfom" from "sector perform" because the stock is up 17% over the last two months. But, the company has been talking up its own case with the argument that long-term prices for aluminum will be pushed up by demand from India and China.
Alcoa has signed a deal to put its soft alloy extrusion business into a joint venture. The segment has been doing poorly, so the move should help Alcoa’s P&L. The company’s forecasts are now for revenue and profits to be at record levels over the next two fiscal years.
Alcoa’s cash flow from operations over the last twelve months was $2.273 billion compared to $1.676 billion in fiscal 2005. If the momentum continues, the stock may rally from its current $30 back toward its 52-week high of nearly $37.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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