The firm cited that Alcoa is working through a challenging period in its portfolio transformation and is facing risks to its commodity business.
Alcoa produces and manages primary aluminum, fabricated aluminum, and alumina.
Last year was a "goldilocks" period for aluminum with high premiums, reduced Indonesian bauxite supply, and Chinese curtailments on smelting/exports, analysts said.
While the company has radically changed its cost structure, global trends are reversing and it has to now "aggressively execute on integration" to meet its targets, the firm noted.
Shares of Alcoa are gaining 0.08% to $11.78 in Monday's early morning trading session.
Separately, TheStreet Ratings team rates ALCOA INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALCOA INC (AA) 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, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.3%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ALCOA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALCOA INC turned its bottom line around by earning $0.19 versus -$2.15 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus $0.19).
- 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 209.6% when compared to the same quarter one year prior, rising from -$178.00 million to $195.00 million.
- Net operating cash flow has significantly increased by 68.23% to -$175.00 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 11.81%.
- 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.
- You can view the full analysis from the report here: AA Ratings Report