Alcoa Drops 5% On Bleak Aluminum Outlook


Alcoa plunged 4.8% in Wednesday’s extended trading session after providing a bleak 4Q outlook for its Aluminum business. The company said it expects a decline in the Aluminum segment from 3Q due to higher power cost projections in Europe, increased maintenance and seasonal labor costs.

Meanwhile, Alcoa (AA) reported stronger-than-expected 3Q results as revenues of $2.37 billion surpassed analyst’s expectations of $2.22 billion. The company reported an adjusted loss per share of $1.17 for the quarter, which was smaller than the Street estimates of a loss of $1.51 per share.

The company’s top-line reflected a 10% sequential growth mainly driven by higher aluminum and alumina prices and increased shipments for alumina. Moreover, adjusted EBITDA increased 54% sequentially to $284 million. (See AA stock analysis on TipRanks).

On September 25, B.Riley Financial analyst Lucas Pipes raised the stock’s price target to $14 (7.7% upside potential) from $11 and reiterated a Buy rating. Pipes believes that the company could benefit from lower costs in 2021 following certain high-cost asset curtailment including the potential sale of its San Ciprian plant. The analyst notes that the initiatives could lead to positive free cash flow in 4Q and beyond for Alcoa.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 2 Buys versus 5 Holds. With shares down nearly 40% year-to-date, the average price target of $14.43 implies upside potential of 11% at current levels.

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