This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Alcoa Stock Is Flying, With Landing Gear Nowhere in Sight

Stocks in this article: AA BA

NEW YORK (TheStreet) -- Alcoa (AA) investors are no longer  "making the best of a bad situation." They're making a lot of money and will for some time.

Wth its recent $3 billion acquisition of Firth Rixson, a U.K.-based maker of jet-engine components, Alcoa management has essentially proclaimed the sky's the limit when it comes to long-term growth.

>>A Euphoric Stock Market Setting All-Time Highs Built on Air

>>FIFA World Cup Still a Huge Draw Without U.S. Team

Since the deal was announced, Alcoa stock soared more than 5% to a new 52-week high of $15.18. Shares closed Thursday at $14.98 and are now up nearly 41% for the year to date.

Some investors may wonder when the landing gears will emerge. Not so fast.

The Firth Rixson deal may seem expensive but management saw a deal they couldn't pass up. By acquiring Firth, Alcoa is aligning itself with the aerospace industry, where it has sought to grow aluminum revenue with (among others) Boeing (BA).

From that standpoint, this deal should pay for itself. But assuming the Boeing angle was not considered, this deal -- on its own -- still presents considerable value for Alcoa, which just acquired a strong position in an area -- isothermal technology -- that is projected to triple its growth in the next eight years.

The addition of Firth Rixson materially expands Alcoa's product portfolio. As of now, Alcoa should not be seen as a company solely tied to the ups and downs of the commodity aluminum industry. With Firth's capabilities in specialized isothermal technology, Alcoa immediately becomes more diversified.

Firth, the world's largest supplier of seamless rings for aero-engines, will also provide Alcoa an additional source of revenue with its rings and metal products business. What's more, management anticipates 60% revenue growth for Firth's business in the next three years, which will contribute $350 million in Ebitda for Alcoa the next two years.

When you consider Firth's projected revenue is expected to grow 12% annually through 2019, double the growth rate of he aerospace industry, what's not to like? Not to mention, 70% of that growth is guaranteed through long-term contracts.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs