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Goldman Sachs Raises Alcoa (AA) to Buy

November 25, 2013 6:50 AM EST Send to a Friend
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Price: $15.01 -4.39%

Rating Summary:
    10 Buy, 9 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 32 | Down: 19 | New: 40
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Goldman Sachs upgraded Alcoa (NYSE: AA) from Neutral to Buy with a price target of $11.00 (from $8.00). Analyst Sal Tharani thinks the company's aluminum business is under-appreciated.

"We believe that the market is not fully appreciating Alcoa's solid position in growing value added and high margin aluminum products for the aerospace and automotive industries," said Tharani.

"We estimate Alcoa will add more than $2bn of revenue and more than $525mn of additional EBITDA to its mid- and down-stream businesses over the next three years from end-market growth and share gains. Alcoa's downstream businesses, particularly Engineered Products, are less aluminum price sensitive and we see upside in Alcoa despite our lackluster outlook for aluminum supply-demand fundamentals. In addition, we see further upside beyond our current estimates from the automotive market through growth in "body-in-white" body sheet, as well as from aluminum-lithium in aero. Also, we expect continued productivity improvements and estimate positive free cash flow starting next year. AA's continuous efforts in portfolio management through high cost capacity closures and its low cost Ma'aden JV should move it further down the cost curve," he added.

For an analyst ratings summary and ratings history on Alcoa click here. For more ratings news on Alcoa click here.

Shares of Alcoa closed at $9.24 yesterday.




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