Alcoa (AA) Shares Plunge After Revenue Miss on Light Volumes; Citi Downgrades to Neutral, Other Analysts More Positive
Alcoa (NYSE: AA) shares are down more than 6% in premarket trading Thursday following the company’s worse-than-expected Q1 sales report.
Alcoa generated $3.29 billion in sales in the first quarter, up 15% YoY but below the consensus estimates of $3.44 billion. The company reported adjusted EPS of $3.06, up from 79c in the same period last year and beating the consensus projection of $2.84 per share.
Adjusted EBITDA stood at $1.07 billion in the period, up from $521 in the year-ago period and compared to the analyst expectations of $1.04 billion.
Aluminum production totaled 498,000 mt, down 9.1% YoY and below estimates of 526,533.
Citi analyst Alexander Hacking downgraded from Buy to Neutral with an $84.00 per share price target.
The downgrade call comes after Citi’s global commodity team said they were “stepping off the aluminum bull train”.
"Aluminum – and by extension AA – remain one of our best long-term ideas in metals but the near-term risk reward is more balanced following a 1000% two year rally in the stock (and 50% YTD). Side note: its been a long time since one of our stocks was a ten bagger. Chinese smelter restarts and softer demand could put a near-term cap on the price," Hacking wrote in a note.
Wolfe Research analyst Timna Tanners reiterated an Outperform rating and lowered the price target to $102.00 per share (from $105.00) after “light Q1 volumes.” The analyst is still bullish on this commodity stock and sees a buying opportunity amidst an after-hours selloff.
“We would be buyers of any weakness after Q1 results, even as we trim 2022E EBITDA to $4.2B from $4.7B and EPS to $12.25 from $12.80 on lower alumina forecasts and assuming some cost pressure. Aluminum prices look well supported by limited new supply and elevated global costs, and we see structural demand resilience from favorable packaging and light-weighting trends. Investors seem keen to own miners for a hedge against inflation, and this sector rotation can support valuation, in our view,” Tanners said in a client note.
BMO analyst David Gagliano lowered the price target to $95.00 per share from $99.00 to reflect incremental cost pressures and lower expected bauxite results.
“Bigger Picture: AA remains well positioned to benefit from higher-for-longer aluminum prices, in our view. But, the rally in AA shares has brought valuations to reasonable levels… hence maintaining the Market Perform,” the analyst wrote.
By Senad Karaahmetovic