In a research report issued today, Sterne Agee CRT analyst Josh Sullivan downgraded shares of Alcoa Inc (NYSE:AA) from a Buy to a Neutral rating, while reducing the price target to $12 (from $17), which represents a slight upside potential from current levels. The decreased rating and price target come as the analyst does not see a near-term catalyst for the stock, and sees increased commodity risk over the next twelve months.

Sullivan commented: “We are downgrading Alcoa to Neutral as the company works through a challenging period in its portfolio transformation as well as fundamental risks to the commodity business. In the last 12 months, Alcoa has made a historic transformation (Firth Rixon, RTI, automotive adoption of BiW, divesting weak assets). However, AA has to now aggressively execute on integration to meet its targets. 2014 was a “Goldilocks” period for aluminum with high premiums, reduced Indonesian bauxite supply, and Chinese curtailments on smelting/exports. While Alcoa has radically altered its cost structure these global trends are reversing. Therefore, after 2Q14 there are few near-term catalyst to justify the risk/reward in the near-term.”

Furthermore, “AA’ portfolio transformation has been nothing short of historic, and in the long-run will serve shareholders well. However, in our sum-of-the-parts analysis at $13 the risk reward is balanced given the lack of catalysts and increased commodity risk over the next twelve months. Given the additional leverage from acquisitions, lower aerospace multiples, and the reversion of the commodity market a break up scenario is unlikely at this point.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Josh Sullivan has a total average return of -3.2% and a 37.5% success rate. Sullivan has a -12.2% average return when recommending AA, and is ranked #2940 out of 3638 analysts.