Alcoa Corp (AA) - Get Alcoa Corporation Report shares surged higher Friday after the aluminum producer posted record third quarter profits late Thursday unveiled a new buyback program and declared its first-ever dividend.
Alcoa said earnings for the three months ending in September were pegged at $1.76 per share, up from a loss of 26 cents over the same period last year and a penny ahead of the Street consensus forecast. Group revenues rose 31.5% to $3.1 billion, again topping analysts' estimates of a $2.9 billion tally.
The group also declared a quarterly dividend of 10 cents per share -- the first since its 'downstream' split in 2016 -- and unveiled plans for a $500 million boost to its share repurchase program, taking the total to $650 million.
This announcement is clear evidence of the work that Alcoans across the globe have completed to position the company to succeed not only in the favorable market environment we're seeing now, but through the commodity cycle," CEO Roy Harvey told investors on a conference call late Thursday.
"It's a very good time to be in the upstream aluminum business. We have a long position in all three of our segments and the work that we've accomplished while continuing has made us more competitive, enabling us to succeed through the commodity cycle, because of this work we are well positioned to capture benefits from improved markets, including the very healthy aluminum prices that we're currently seeing," Harvey said.
Alcoa shares were marked 13.5% higher in early trading Friday to change hands at $55.17 each, a move that would extend the stock's six-month gain to around 138%.
"We believe Street estimates could well be ~40% too low for Alcoa in 2022 as aluminum fundamentals continue to improve and alumina / bauxite markets are now catching up on tightness / relative value to smelters," said Credit Suisse analyst Curt Woodworth, who carries an 'outperform' rating on the stock and lifted his price target on Alcoa by $6, to $62 per share following last night's earnings.
"Alcoa also stands to greatly benefit from sharply higher VAP (value add premiums) in 2022 which are set on an annual basis and have seen spot increases between $500-1000/tonne across billet, foundry alloy, and other value add segments," he added.