The firm also lowered 2015 earnings estimates to $0.74 from $0.83 per share, with 2016 and 2017 earnings estimates to $0.88 from $1.10, and $1.14 from $1.31, respectively.
Morgan Stanley said it lowered its earnings estimates because all-in aluminum prices, including regional premiums, are now near a six-year low.
"Upstream performance should be near a trough at current prices, which should help shift focus to the higher-multiple earnings from downstream portfolio," Morgan Stanley analysts said.
However, the firm expects the portfolio of Alcoa will be boosted by recent acquisitions related to aerospace products and new capacity investments in automotive, according to the analyst note.
Alcoa is engaged in lightweight metals engineering and manufacturing that operates in four segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions.
Separately, 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 revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.4%. 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. This trend suggests that the performance of the business is improving. 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 ($0.94 versus $0.19).
- 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.
- AA has underperformed the S&P 500 Index, declining 20.49% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- AA's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that AA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.67 is low and demonstrates weak liquidity.
- You can view the full analysis from the report here: AA Ratings Report