Shares are advancing 1.39% to $9.49 on Tuesday morning.
Part of this recovery can be attributed to the metals firm announcing at the end of September that it will separate into two publicly-traded companies.
The split is nearing as it is expected to take place in the first half of 2016.
Immediately following this separation news, TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio said, "Alcoa 2 minus 1 equals 3--The two companies are worth more than the whole."
CEO Klaus Kleinfeld also added that it was the "right time to split the business," and that the two businesses "allows us to put both businesses onto their own path independently to pursue their own strategies, which are very distinct," according to CNBC.com.
The company keeping the Alcoa name will focus on upstream products, including five business units--bauxite, alumina, aluminum, casting and energy. The other company, will focus on engineered products, which include the aerospace and automotive segments.
About a month after this spinoff announcement, activist hedge fund Elliott Management took a 6.4% stake in the lightweight-metals company, the Wall Street Journal reported.
Alcoa confirmed that "Elliott advised us of their ownership of AA shares several weeks ago, shortly after we announced the separation of our Upstream and Value-Add businesses. Since then, we have had constructive discussions with Elliott."
Elliott added that it was interested in investing in Alcoa based on its thriving aerospace and automotive business, which was overshadowed by the commodity struggles, the Journal said.
Overall, it appears the the stock is showing some promise and Cramer pointed out that "Alcoa is the only aluminum company that is building new plants in this country, and when this company splits you might like both pieces."
Cramer also made bullish comments about how Ford Motor (F) said it would begin using a new type of aluminum from supplier Alcoa to create parts for the F-150 pickup. "People are crazy for the 150 that's made of aluminum," he said.
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 good cash flow from operations, notable return on equity and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 68.67% to $420.00 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 -54.27%.
- 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 83.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The gross profit margin for ALCOA INC is rather low; currently it is at 18.19%. It has decreased from the same quarter the previous year.
- You can view the full analysis from the report here: AA