How Do Markets See Alcoa after the Split and US Election?


Dec. 28 2016, Published 9:16 a.m. ET

Alcoa’s split

On November 1, 2016, Alcoa split into two new entities—Alcoa (AA) and Arconic (ARNC). The split completed the process that was initiated by the company in September 2015. However, the actual seeds of the split were planted almost a decade ago when Alcoa started to expand its value-add portfolio. Some observers point to Warren Buffett’s acquisition of Precision Castparts (BRK-B) as the final trigger for Alcoa’s split.

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Alcoa’s split turned out to be somewhat of a disappointment. While Alcoa has seen some upward price action, Arconic has been on a losing spree since the listing. When the split was announced last year, Arconic was supposed to be the crown jewel that would help drive value for shareholders once it was listed as a separate entity. The commodity business was expected to sag in what looked like a prolonged slowdown in metal prices (CENX).

Series overview

When Alcoa’s split was announced in September 2015, aluminum prices were trading near their six-year lows. The aerospace sector, which is the key customer segment for Arconic, was growing at a steady pace. However, metal prices showed resilience this year. Aluminum prices rose 16.7% year-to-date.

In this series, we’ll see how markets see Alcoa after the split. The US election triggered a rally in metals and mining stocks (XME). We’ll also analyze Alcoa’s key bullish and bearish drivers as we head into 2017.

Let’s sart by analyzing analysts’ recommendation and target prices for Alcoa.


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