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Alcoa Inc Stock Hold Recommendation Reiterated (AA)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Alcoa (NYSE:AA) has been reiterated by TheStreet Ratings as a hold with a ratings score of C- . The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 19.1%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ALCOA INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALCOA INC increased its bottom line by earning $0.52 versus $0.24 in the prior year. For the next year, the market is expecting a contraction of 50.0% in earnings ($0.26 versus $0.52).
  • The share price of ALCOA INC has not done very well: it is down 13.91% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has decreased to $263.00 million or 46.21% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 183.1% when compared to the same quarter one year ago, falling from $172.00 million to -$143.00 million.

Alcoa Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina. The company operates in four segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions. Alcoa has a market cap of $9.23 billion and is part of the basic materials sector and metals & mining industry. The company has a P/E ratio of -41.2, below the S&P 500 P/E ratio of 17.7. Shares are unchanged year to date as of the close of trading on Tuesday.

You can view the full Alcoa Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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