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Aluminum Producers Rally: AA, CENX, ACH, NOR, KALU

NEW YORK (TheStreet) -- Aluminum producers rallied for the second time within two weeks on little apparent news.

Micro-cap producer Noranda Aluminum Holding (NOR) led the sector, up 8.9% to $2.95, followed by industry heavyweight Alcoa (AA) which saw 6.9% gains to $9.91. Century Aluminum (CENX), which is due to report earnings after market close, added 4.5% to $9.18, Aluminum Corp of China (ACH) was 3% higher to $9.31, and Kaiser Aluminum  (KALU) climbed 1.4% to $68.15.

In October, Bloomberg said the run-up in aluminum stocks was likely due to speculation prices for the metal would spike over the remainder of the year. On the London Metal Exchange, aluminum for delivery in three months has risen 2.2%.

Alcoa

TheStreet Ratings team rates Alcoa Inc as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate Alcoa Inc (AA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 116.8% when compared to the same quarter one year prior, rising from -$143 million to $24 million.
  • Alcoa Inc reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALCOA INC reported lower earnings of 17 cents a share vs. 52 cents a share in the prior year. This year, the market expects an improvement in earnings ($0.34 versus $0.17).
  • Net operating cash flow has decreased to $214.00 million or 18.63% when compared to the same quarter last year. Despite a decrease in cash flow of 18.63%, Alcoa Inc is in line with the industry average cash flow growth rate of -28.16%.
  • The gross profit margin for Alcoa Inc is rather low; currently it is at 16.77%. Regardless of AA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AA's net profit margin of 0.41% is significantly lower than the industry average.

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