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Why Alcoa (AA) Is Still A "Hold"

NEW YORK (TheStreet) -- The Street Ratings team has reiterated its "hold" rating on Alcoa (AA - Get Report) with a score of C, despite recent gains.

Shares of Alcoa are up 1% to $9.79 in trading on Wednesday, and have trended up since October 3, when the stock closed at $7.86. The metals and mining company hit a one-year high of $9.92 on November 4. Over the past year the stock has fluctuated between $7.71 and $9.92. More than 20.3 million shares of Alcoa have moved on Wednesday, which is less than the average of 26.7 million shares.

TheStreet Ratings team rates ALCOA INC as a Hold with a ratings score of C. TheStreet Ratings 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 weak operating cash flow, poor profit margins and generally higher debt management risk."

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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 -$143.00 million to $24.00 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 $0.17 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.17).
  • 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.
  • Net operating cash flow has decreased to $214.00 million or 18.63% 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.
  • You can view the full analysis from the report here: AA Ratings Report

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