The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
The market clearly likes Alcoa
The world leader in the production and management of primary aluminum, fabricated aluminum and alumina raised the prices of some of its products in March. The stock market clearly likes this news as the company's stock rising by more than 8% since then.
Alcoa competes with other international metals and mining giants like Rusal,
Our price estimate for Alcoa, at $17.68, is roughly in line with the stock's market price.
Recent developments have been rather favorable for aluminum manufacturing companies, with Alcoa clearly out in front in this race. We
at the growing adoption of aluminum in the packaging industry.
More recently, we
the rise in copper prices and the subsequent effect of manufacturing companies switching to cheaper substitutes like aluminum.
Alcoa raised prices for several of its industrial products sold to customers across North America. The increase of 10 cents per pound for select plate products will affect all agreements signed on or before March 14, 2011. On top of this, the company removed two 5% discounts it provided on products sold for aerospace and defense purposes.
The price hike will affect the average price per metric ton of engineered products, as well as Alcoa's flat-rolled products. The 10-cents-per-pound price hike translates to an increase in revenue of about $220 per metric ton.
Assuming that the price increase applies to all engineered products by the end of the year, this would still only mean a relatively small 1% increase in our $17.68 price estimate for Alcoa. Similarly, the $220 price increase in flat-rolled products would add another 1% to our price estimate. Combined, these two $220 increases in average price per ton would push our price estimate for Alcoa just over $18.
See our full analysis and $17.68 price estimate for Alcoa
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