Shares of aluminum giant
) screamed higher yesterday after
) raised its rating citing tightening global aluminum markets and
higher regional aluminum premiums that would provide support to
ALCOA INC (AA): Free Stock Analysis Report
GENERAL MOLY IN (GMO): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
STILLWATER MNG (SWC): Free Stock Analysis
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JPMorgan lifted Alcoa to "Overweight" from "Neutral" and
increased its price target on the shares to $15 from $9 on
expectations of tighter global supplies of aluminum following
capacity reductions. The firm also nearly doubled the company's
earnings estimate for 2014 to 78 cents per share from 40 cents
Alcoa's shares shot up as much as 8.4% in the trading session
yesterday to touch a fresh 52-week high of $12.31. The stock
eventually closed at $12.13, gaining 6.8%. Alcoa has racked
up a one-year return of around 37% and its shares are up roughly
14% so far this year.
Alcoa has been grappling with weak aluminum pricing. London Metal
Exchange (LME) aluminum prices dropped to a four-year low during
fourth-quarter 2013 given the oversupply of the metal in the
market, evidenced by large aluminum inventories in LME
warehouses. LME cash price fell 7% in the fourth quarter, hurting
the company's sales in the process.
Alcoa has taken up a number of restructuring measures (including
closure of smelters) and is aggressively pursuing cost-cutting
actions amid a weak pricing environment.
Alcoa swung to a loss in the fourth quarter, reported on Jan 9,
on hefty goodwill impairment charges. Adjusted earnings missed
the Zacks Consensus Estimate. Sales fell on weak aluminum pricing
but beat expectations. The company expects aluminum demand to
rise 7% this year.
Alcoa is witnessing strength in aerospace and automotive markets.
The company sees significant growth of aluminum use in the auto
sector this year as automakers increasingly look for the metal as
a cost-effective mean to boost performance, safety, durability
and fuel efficiency of their vehicles.
However, Alcoa is still witnessing softness across building and
construction and commercial transportation markets. Moreover,
weakness in non-residential building and construction market is
expected to persist in Europe.
Alcoa is a Zacks Rank #3 (Hold) stock.
Other companies in the mining industry worth considering include
General Moly, Inc.
Stillwater Mining Co.
) with both holding a Zacks Rank #1 (Strong Buy).