Alcoa (AA) Q3 EPS Estimates Raised at Goldman Sachs

Goldman Sachs maintained a Buy rating on Alcoa (NYSE: AA) with a price target of $20. Q3 EPS estimates were raised to $0.28 (from $0.22) due to higher 3Q aluminum pricing assumptions. Analyst Sal Tharani recommends the stock heading into its Q3 print.

"We see the main driver for AA shares going into 2H14 be the steady grind up in aluminum pricing, which is supported by further supply discipline in the global aluminum market. AA’s sensitivity for every $100/t increase in aluminum pricing is about $240mn of annual net income or about $0.20 per share. In 3Q, aluminum prices have increased about $200/t, which by our estimates, would contribute an additional $120mn ($0.10/sh) to the company’s bottom line," said Tharani.

"Not to be overlooked is AA’s transition into a high-margin, downstream-focused industrial company, including an expected decade-long exponential growth in aluminum BiW, where AA is the leader. Lastly, its new $1bn long-term contract with Boeing and recent Firth Rixson acquisition should help Alcoa solidify its aerospace position with a growing multi-material portfolio. Overall, we recommend Alcoa going into 3Q14 earnings as the stock has lagged its peers during a rising all-in aluminum pricing environment," 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 $15.63 yesterday.

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