How Analysts Rated Alcoa After Earnings

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Alcoa Inc. (NYSE: AA) reported its third-quarter financial results last Tuesday. Unfortunately the results missed on both the top and the bottom lines, and investors sent the stock lower as a result. Separately, analysts somewhat cut their targets across the board.

Here, 24/7 Wall St. has includes some brief highlights from the earnings report, as well as what analysts said after the fact.

The company posted $0.32 in earnings per share (EPS) on $5.21 billion in revenue. The consensus estimates had called for $0.34 in EPS on revenue of $5.33 billion. In the same period of last year, Alcoa reported EPS of $0.21 and $5.57 billion in revenue.

In spite of near-term market challenges, the Arconic segments reported combined year-over-year profit growth, and the Alcoa segments, Alumina and Primary Metals, maintained profitability sequentially despite continued low alumina and aluminum pricing by managing costs and capacity.

Merrill Lynch downgraded Alcoa to a Neutral rating from Buy and cut its price target to $30 from $33. The firm described its investment rationale in its report as follows:

Our downgrade to Neutral (from Buy) reflects our view that AA’s aerospace-focused downstream segment may still struggle with execution woes and delays over the next several quarters. We cut our ests in tandem with new lower guidance, with 2016E Engineered Products and Solutions (EPS) revs cut to $5.6-5.8B from Q3’s $5.9-6.1B and last Nov’s guided $7.2B. We question the timing of the aero ramp up amid delays and potential requalification needs that may continue to hamper growth. Despite our positive view on jet engine specialty metals demand, we see downside risk to AA’s guidance on aerospace build rates. BofAML’s aerospace team forecasted deliveries below OEM guidance.

A few other analysts weighed in on Alcoa as well:

  • Cowen has a Market Perform rating but raised its price target to $30 from $10 — instead of this being a 200% hike, this was just a split adjustment.
  • Deutsche Bank has a Buy rating and cut its price target to $33 from $36.
  • RBC has a Sector Perform rating and lowered its price target of $31 from $33.

Shares of Alcoa closed Friday at $26.44, with a consensus analyst price target of $32.39 and a 52-week trading range of $18.42 to $34.50.

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