Alcoa Inc (AA) Earnings Should Keep Benefiting From Premiums, Growth

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Alcoa Inc (NYSE:AA) kicked off earnings season with the results from its most recently completed quarter last night. The aluminum maker beat estimates for earnings per share but missed on revenue. JPMorgan analysts have lowered their earnings per share estimates for this year but maintained their $15 a share price target and Overweight rating on the stock.

Alcoa estimates adjusted

In a report dated April 9, 2014, analyst Michael Gambardella and his team say they have also increased their earnings per share estimate for 2015. Their estimate for 2014 declined from 69 cents to 60 cents a share. However, their 2015 estimate rose from 68 cents to 80 cents a share.

The reason they lowered Alcoa Inc (NYSE:AA)’s estimates for this year is because the aluminum maker came up a bit below their expectations for the first quarter. They raised next year’s estimates because the premiums are still higher than were previously expected.

Alcoa to see benefits in downstream operations

The JPMorgan team believes Alcoa Inc (NYSE:AA)’s downstream operations will benefit from increasing demand in the aerospace and auto industries. The company’s upstream operations have been a trouble area, although it has taken some major steps to shut down or limit operations which are unable to generate returns which are acceptable in the current pricing environment.

They note that all of Alcoa Inc (NYSE:AA)’s segments came out ahead except for its Primary Metals division. Adjusted earnings per share were 9 cents, compared to their estimate of 8 cents and consensus estimates of 5 cents. The company’s Alumina, GRP and EPS all posted results which were a bit above JPMorgan’s estimates. Primary Metal, however, was slightly lower than their estimates.

Alumina’s primary benefit came from higher realized prices. The results for Alcoa Inc (NYSE:AA)’s Primary Metals business were negatively impacted by higher than expected cash costs and lower than expected realized prices. Both GRP and EPS benefited from higher realized prices and lower costs.


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