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2Q17 Earnings Preview: Do Analysts Find Value in Alcoa?

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2Q17 earnings preview

Previously in this series, we’ve looked at Alcoa’s (AA) 2Q17 earnings estimates. In this article, we’ll see how leading brokerages are rating Alcoa stock ahead of its 2Q17 earnings release.

Alcoa carries a consensus one-year price target of $43.73 based on a survey of 13 analysts polled by Thomson Reuters. This target represents a 26.4% upside over Alcoa’s July 12 closing prices. Looking at other aluminum producers (IWM)(RUT-INDEX), we see that Norsk Hydro (NHYDY) is trading 8.02% below its consensus price target while Century Aluminum (CENX) is trading 1.7% above its consensus one-year price target.

Out of the 13 analysts polled by Thomson Reuters, three have given Alcoa a “strong buy” rating while seven analysts have a “buy” rating on the stock. The remaining three analysts rate Alcoa as a “hold.” Century Aluminum has received a “hold” rating from all four analysts polled by Thomson Reuters.

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Outlook

Alcoa and other aluminum producers (SOUHY) have seen upward price action this year amid improved market sentiment. Notably, aluminum has been among the better-performing industrial metals this year. Furthermore, aluminum’s outlook looks decent amid a better demand environment from China. Even pessimistic estimates peg global aluminum demand growth at 5% this year. On the supply side, there have been no major smelter restarts outside of China, although Alcoa is now looking to partially restart its Warrick smelter. Also, markets expect Chinese aluminum production to fall later this year on the planned curtailments in the country.

In the next article, we’ll see how analysts are rating Century Aluminum ahead of its 2Q17 earnings.

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