Alcoa is set to release the earnings results from its fourth fiscal quarter after closing bell tonight. The general consensus on Wall Street suggests earnings of 25 cents per share on $5.99 billion in revenue for the aluminum maker.

Alcoa Inc Earnings Preview: Stock Upgraded Before Report

Alcoa upgraded by Nomura

Ahead of tonight’s earnings report, Nomura analysts upgraded Alcoa from Neutral to Buy and raised their price target from $15 to $23 per share. They see downstream “acceleration and primary tailwinds” as driving outperformance at the aluminum maker, reports Street Insider.

Analyst Curt Woodworth said he has been cautious on Alcoa because of concerns about the company’s packaging divisions. Also he noted that premiums were expected to fall in the second half of 2014.

Alcoa to benefit from aluminum deficits

Woodworth also pointed out that Alcoa stock has been range-bound since the middle of last year. However, he notes that the company should benefit as global supply of aluminum falls, thus lifting prices and pushing premiums up over $500 a ton in the U.S. and the Europe. Additionally, he said Alcoa will enjoy an annualized tailwind of about 20 cents per share in earnings due to foreign exchange rates.

The analyst’s worries about Alcoa’s packaging segment have abated because he expects the company’s packaging margins to stabilize as the company displaces its packaging capacity over to automotive. As Alcoa’s packaging margins stabilize, Woodworth also expects Alcoa to see “significant” growth in its automotive segment, which should result in “meaningful” growth in EBITDA for the aluminum maker.

Nomura now bullish on Alcoa

The Nomura analyst also points out that his estimate is significantly higher than the Wall Street consensus estimates for Alcoa. He thinks most are underestimating the “downstream earnings power” the company will see in the next few years and states that Alcoa still hasn’t adjusted for the benefits it will receive from foreign exchange rates and the physical premiums on aluminum.

Woodworth expects gradual but continued improvement in the fundamentals of the aluminum industry over the next several years. He points out that LME inventory levels should fall due to deficits in parts of the world excluding China. As a result of these deficits, he expects to see “tight regional markets,” resulting high premiums compared to historical standards.

Shares of Alcoa slipped as much as 0.64% to $16.01 per share during regular trading hours today.