More Squawk From Jim Cramer: Alcoa (AA) CEO Kleinfeld Getting 'No Credit Whatsoever'
NEW YORK (TheStreet) -- Elliott Management has disclosed a 6.5% stake in Alcoa (AA) - Get Report , noting that it supports the company's decision to split into two but believes there is room for margin improvement, CNBC reports.
Additionally, the hedge fund is pressuring Alcoa to sell its power generation unit.
"Obviously, you don't want a Timkensteel (TMST) situation, which was a disaster," TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning. Timken's board succumbed to activists' demands to break up the company, causing the stock to tank.
However, Cramer noted that he thinks Alcoa CEO Klaus Kleinfeld would probably agree with Elliott Management's advice.
Cramer added that Kleinfeld is "getting no credit whatsoever" for what he's been doing at the company, as the sustained downturn in commodities' prices overshadows the CEO's actions.
"A lot is going right at Alcoa, but if [a company] makes a metal - any metal - the stock goes lower," Cramer noted.
Alcoa, based in New York City, is engaged in lightweight metals engineering and manufacturing.
Steel prices have "fallen off a cliff," and aluminum prices are only slightly higher, Cramer said, adding that China will likely continue to pump aluminum.
"I am entirely confident that this stock can work its way higher, but it is hostage more to China than to anything else," Cramer said.
Separately, 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 reasonable valuation levels, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 68.67% to $420.00 million when compared to the same quarter last year. In addition, ALCOA INC has also vastly surpassed the industry average cash flow growth rate of -54.42%.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ALCOA INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.52%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 83.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The gross profit margin for ALCOA INC is rather low; currently it is at 18.19%. It has decreased from the same quarter the previous year.
- You can view the full analysis from the report here: AA
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.