NEW YORK (TheStreet) -- Alcoa (AA - Get Report) rose to a 52-week high of $14.13 on Thursday amid reports that Ford's (F) lightweight Fusion concept car could provide a boost to the world's third-largest aluminum producer.
The prototype, which Ford unveiled Tuesday, is approximately 800 pounds, or 25%, lighter than the regular Fusion model due to an increase in aluminum use. Ford does not plan to sell the car in the near future in part because the lighter materials are more expensive; however, the auto industry is actively researching these materials to save fuel.
"This vehicle is confirmation to our thesis of the automotive industry moving down an aluminum adoption curve beyond expectations. The F-150 broke the ice in January and its scale is making additional market segments viable. In the last six months this curve has evolved from the large F-150, to General Motors (GM) trucks, to a smaller Wrangler and now potentially sedans...
The light weighting technologies reduce the weight of the Fusion to that of a smaller compact Fiesta, nearly 25% lighter. The success of the aluminum F-150 has shown Ford the potential opportunity to lightweight its entire lineup...While this is just a concept vehicle it clearly demonstrates the market is testing the smaller vehicle suite for aluminum. Further, given the trajectory of automotive aluminum announcements over the last six months the adoption curve continues to take shape. Therefore, we continue to believe industry estimates for ~1.2 million tons of automotive aluminum sheet usage by ~2025 are very conservative, as well as Alcoa's $1.3 billion revenue assumption for 2018." The stock was up 1.23% to $13.99 at
- Compared to its closing price of one year ago, AA's share price has jumped by 58.27%, exceeding the performance of the broader market during that same time frame. Although AA had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- AA, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues slightly dropped by 6.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ALCOA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALCOA INC swung to a loss, reporting -$2.15 versus $0.17 in the prior year. This year, the market expects an improvement in earnings ($0.45 versus -$2.15).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, ALCOA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- 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 219.5% when compared to the same quarter one year ago, falling from $149.00 million to -$178.00 million.
- You can view the full analysis from the report here: AA Ratings Report