NEW YORK (TheStreet) -- Alcoa (AA) jumped early in Tuesday's session after receiving an upgrade from JPMorgan. The investment firm upgraded the stock to "overweight" from "neutral" and raised its price target to $15 to reflect tightening aluminum markets and rising regional aluminum premiums on earnings.
"Given the pace and amount at which premiums have recently increased, it is clearly difficult to forecast for how long they will remain near current levels which we believe provide a significant amount of earnings support to the company's primary aluminum smelting operations," wrote JPMorgan analyst Michael F. Gambardella in the report.
The firm increased its 2014 earnings estimates to 78 cents a share from 40 cents a share and fiscal 2015 earnings to 68 cents a share from 55 cents a share. Analysts surveyed by Thomson Reuters anticipate net income of 32 cents a share in fiscal 2014 and 58 cents a share in fiscal 2015.
The world's third-largest aluminum producer enjoyed a strong surge in share prices last week, after announcing it would close two potlines at its Massena East plant in New York state on the grounds they were not competitive anymore. The company also said it plans to expand its Davenport, Iowa factory, a plant dedicated to supplying aluminum to car and truck producers.
On Friday, the Pittsburgh-based business announced its board had approved a quarterly dividend of 3 cents a share payable Feb. 25 to common stock shareholders of record at the close of Feb. 7. On its cumulative preferred stock priced at $3.75 a share, the company will offer a quarterly dividend of 93.75 cents a share on April 1 to shareholders of record at the close of March 14.
By market open, shares had gained 4.7% to $11.89.
TheStreet Ratings team rates ALCOA INC as a Hold with a ratings score of C. The 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. Among the primary strengths of the company is its solid stock performance, considering both the consistency and magnitude of the price movement over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
- You can view the full analysis from the report here: AA Ratings Report