Why Alcoa (AA) is Gaining Today

NEW YORK (TheStreet) -- Alcoa (AA) shares rose 1.6% to $10.60 on Friday in anticipation of Ford's (F) unveiling of a new aluminum F-Series truck at the Detroit Auto Show. Shares of Ford, meanwhile, declined 0.5% to $15.26.

Ford reportedly asked Alcoa for samples of its aluminum to show at the auto show to show the durability of the metal. Alcoa produces military-grade aluminum that's used in durable military vehicles. According to USA Today Ford will use the material to show that its truck will use metal that's more durable that that used for beer cans.

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 compelling growth in net income, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 116.8% when compared to the same quarter one year prior, rising from -$143.00 million to $24.00 million.
  • ALCOA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALCOA INC reported lower earnings of $0.17 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.17).
  • The gross profit margin for ALCOA INC is rather low; currently it is at 16.77%. Regardless of AA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AA's net profit margin of 0.41% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $214.00 million or 18.63% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: AA Ratings Report

TheStreet Ratings team rates FORD MOTOR CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FORD MOTOR CO (F) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • F's share price has surged by 30.43% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, F should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $3,840.00 million or 12.05% when compared to the same quarter last year. Despite an increase in cash flow, FORD MOTOR CO's cash flow growth rate is still lower than the industry average growth rate of 31.10%.
  • FORD MOTOR CO's earnings per share declined by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FORD MOTOR CO reported lower earnings of $1.42 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus $1.42).
  • 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 Automobiles industry and the overall market, FORD MOTOR CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

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