Alcoa Corporation AA has been facing persistent cost and expense pressures. In the first quarter of 2026, the company’s cost of goods sold increased 3% year over year. Selling, general, administrative and other expenses also rose approximately 16.9% year over year. Also, depreciation, depletion and amortization expenses climbed around 9% year over year.
Energy remains one of the largest cost components for the company, accounting for around 24% of alumina refining production costs and 24% of primary aluminum production costs in 2025. Given the energy-intensive nature of aluminum smelting, fluctuations in electricity, diesel and natural gas prices continue to pose a major risk. For second-quarter 2026, Alcoa expects approximately $15 million in unfavorable impacts from higher energy prices, mainly due to diesel costs associated with the Middle East conflict.
Raw material consumption also continues to pressure margins. For each metric ton of alumina produced, Alcoa consumes 2.2-4.0 metric tons of bauxite and 80-130 kilograms of caustic soda. Aluminum production also requires 1.91-1.94 metric tons of alumina and 13.26-16.82 megawatt-hours (MWh) of electricity per metric ton. Volatility in prices of caustic soda, calcined petroleum coke and other raw materials may increase production costs.
The company is also facing additional costs tied to restart activities and tariffs. In the first quarter of 2026, Alcoa continued restart operations at the San Ciprián smelter, with the restart safely completed in April 2026. Related restart expenses remained part of special items during the quarter.
Despite these cost pressures, Alcoa remains focused on improving operational efficiency, expanding renewable energy usage and maintaining disciplined capital allocation to support margins. However, ongoing volatility in energy and raw material costs may continue to weigh on the company’s near-term profitability.
AA’s Peer Performance
Among its major peers, Constellium SE CSTM is facing cost pressure. Constellium’s cost of sales increased 18.9% in the first quarter of 2026. Constellium’s SG&A expenses rose 24.4% year over year in the same period.
The escalating costs and expenses are also a concern for Ryerson Holding Corporation RYZ. Ryerson’s cost of sales rose 37.2% year over year in first-quarter 2026. Ryerson’s warehousing, delivery, selling, general and administrative expenses also increased 31.2% year over year in the same period.
AA’s Price Performance, Valuation and Estimates
Shares of Alcoa have increased 3.5% in the past three months compared with the industry’s growth of 4.6%.
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From a valuation standpoint, AA is trading at a forward price-to-earnings ratio of 7.89X, below the industry’s average of 8.21X. Alcoa carries a Value Score of A.
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The Zacks Consensus Estimate for AA’s 2026 earnings has increased 35.2% over the past 60 days.
Image Source: Zacks Investment Research
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
