Alcoa Corporation (NYSE:AA) shares are trading lower on Thursday after rebounding from Wednesday's increase.
Yesterday, the company reported third-quarter sales of $2.904 billion, missing the consensus of $2.967 billion and adjusted EPS of $0.57, exceeding the consensus of $0.28.
JPMorgan analyst Bill Peterson raised the price target to $39 from $36 while maintaining a Neutral rating.
The analyst wrote that with low-hanging fruit already secured, future progress depends on savings from Kwinana's curtailment, the ramp-up at Warrick/Alumar and potential benefits from the Inflation Reduction Act (IRA).
The analyst anticipated additional support from lagged alumina pricing for the fourth quarter before it normalizes later next year.
The analyst said he is also eager for updates on the proposed San Ciprian resolution, which seemed to hinge on government and union cooperation before funding runs out in the coming months.
Also Read: Alcoa Analysts Increase Their Forecasts After Upbeat Earnings
Alcoa appeared to be adopting a disciplined approach to enhance efficiencies, reduce costs and streamline its portfolio, which was expected to strengthen its capital structure and generate further EBITDA growth independent of commodity pricing, added the analyst.
The analyst did reflect a cautious near-term outlook for aluminum due to conflicting indicators from China, the potential impact of the U.S. elections and the beginning of the Federal Reserve's rate-cutting cycle.
The analyst believed the market needs more evidence of supportive fiscal stimulus from China, improved macroeconomic activity and significant inventory draws to trigger the next sustainable increase in aluminum pricing, likely extending into 2025.
Overall, the analyst said execution remained a "show me" story, with the next catalyst likely being a decision regarding the loss-making San Ciprian complex before the end of 2024.
Investors can gain exposure to the stock via Macquarie ETF Trust Macquarie Energy Transition ETF (NYSE:PWER) and SPDR S&P Metals & Mining ETF (NYSE:XME).
AA Price Action: Alcoa shares are down 3.73% at $40.50 at publication Thursday.
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