Alcoa (AA) Investment Grade Credit Rating at Risk Despite Q2 Beat
Goldman Sachs today maintained a Neutral rating on Alcoa (NYSE: AA) with a price target of $8.00. Yesterday Alcoa reported Q2 results that topped estimates due to strength from aerospace. However, analyst Sal Tharani, thinks Aloca's investment grade rating is at risk.
"We continue to expect aluminum prices to remain relatively flat year over year, at $0.91/lb in 2013 compared to $0.92/lb in 2012. We remain negative on the supply-demand fundamentals of aluminum and while a significant amount of global capacity is operating below cash cost levels (excluding regional premiums), we believe fundamentals could keep pricing under pressure. With flattish aluminum prices in 2013, we expect Alcoa to generate negative FCF of $1.1bn, compared to Alcoa's guidance of positive FCF and, accordingly, see risk to its investment grade rating," said Tharani.
For an analyst ratings summary and ratings history on Alcoa (NYSE: AA) click here. For more ratings news on Alcoa click here.
Shares of Alcoa closed at $7.92 yesterday, with a 52 week range of $7.63-$9.93.
"We continue to expect aluminum prices to remain relatively flat year over year, at $0.91/lb in 2013 compared to $0.92/lb in 2012. We remain negative on the supply-demand fundamentals of aluminum and while a significant amount of global capacity is operating below cash cost levels (excluding regional premiums), we believe fundamentals could keep pricing under pressure. With flattish aluminum prices in 2013, we expect Alcoa to generate negative FCF of $1.1bn, compared to Alcoa's guidance of positive FCF and, accordingly, see risk to its investment grade rating," said Tharani.
For an analyst ratings summary and ratings history on Alcoa (NYSE: AA) click here. For more ratings news on Alcoa click here.
Shares of Alcoa closed at $7.92 yesterday, with a 52 week range of $7.63-$9.93.