The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (Trefis) -- Alcoa (AA) recently announced its partnership with Condexis and CO2 Solutions to develop carbon capture technology for commercial uses. As the world leader in the production and management of primary aluminum, fabricated aluminum and alumina, the U.S. Department of Energy (DOE) has endorsed this project by helping finance it. Alcoa competes with other international metals and mining giants like Rusal, Rio Tinto (RIO), BHP Billiton (BHP) and Chalco (ACH).
Our price estimate for Alcoa is $17.68 and roughly in line with the stock's market price.
Alcoa has been focused on making its operations sustainable for quite some time now. The company's involvement in the carbon capture technology initiative seems to be the next step in that direction. The DOE contributed about $13.5 million to this project with other funding costs taken up by Alcoa.The project intends to use a proprietary process employing an in-duct scrubber to reclaim the alkaline clay produced as the primary by-product of the aluminum manufacturing process. The scrubbed alkaline clay would then be combined with treated flue gas, which is a carbon-rich gas that is normally released into the atmosphere during the manufacturing process. The goal is use certain enzymes to get mineral-rich products that can be used in other industries. Manufacturing companies around the world are struggling to find profitable ways of managing waste while they see rising costs associated with stringent environmental protection regulations. If Alcoa is able to show success in this pilot project, this would directly impact the profitability of the primary metals division, which processes raw alumina to manufacture aluminum. We initially estimated that the division would be able to generate an EBITDA margin of close to 14% in the years to come. In a scenario where the carbon capture technology proves successful and can be implemented on a larger scale, then this margin inch higher in the coming years. If EBITDA margin increased to 17% in the next 5 years, this would imply a 10% upside for the company's stock price estimate bringing the value to nearly $18.20. See our full analysis for Alcoa. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV