Alcoa: Hold Rating Amid Immediate Cost Pressures and Delayed Profitability Gains

Katja Jancic, an analyst from BMO Capital, assigned the Hold rating on Alcoa (AA – Research Report). The associated price target is $37.00.

Katja Jancic’s rating is based on Alcoa’s stronger-than-anticipated first-quarter performance and the potential for future benefits from favorable aluminum pricing. Jancic acknowledges the company’s steps towards profitability improvement, such as the strategic acquisition of Alumina Limited, which is expected to conclude in the third quarter. However, the analyst suggests that the current market price has already integrated these positive developments, which tempers the immediate upside potential of Alcoa’s stock.

In addition, Jancic points to certain challenges that might impact Alcoa’s earnings in the near term, like increased maintenance and mining costs, as well as higher alumina costs, which are predicted to unfavorably affect second-quarter EBITDA. While Alcoa has outlined actions that could lead to significant EBITDA improvements by the end of 2025, Jancic believes that the realization of these benefits may be delayed until 2025. This combination of immediate cost pressures and the postponement of profitability gains contributes to the Hold rating, indicating that while the company has solid prospects, the current stock price likely reflects its near-term trajectory.

In another report released today, Bank of America Securities also reiterated a Hold rating on the stock with a $40.00 price target.

Based on the recent corporate insider activity of 32 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of AA in relation to earlier this year.

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Alcoa (AA) Company Description:

Alcoa Corp. engages in the production of bauxite, alumina, and aluminum products. It operates through the following segments: Bauxite, Alumina, and Aluminum. The Bauxite segment represents the company’ global bauxite mining operations. The Alumina segment includes the company’s worldwide refining system, which processes bauxite into alumina. The Aluminum segment combines smelting and casting operations produce primary aluminum. The smelting operations produce molten primary aluminum, which is then formed by the casting operations into either foundry ingot or into value add ingot products, including billet, rod, and slab. The company was founded by Charles Martin Hall on July 9, 1886 and is headquartered in Pittsburgh, PA.