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Most Analysts View Alcoa Favorably after Its 3Q17 Earnings


Nov. 8 2017, Updated 10:00 a.m. ET

3Q17 earnings

Alcoa (AA) released its 3Q17 earnings on October 18 and reported revenues of $2.96 billion in the quarter. Alcoa posted revenues of $2.85 billion in 2Q17 and $2.32 billion in 3Q16. Alcoa posted an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $561 million in 3Q17—compared to $483 million in 2Q17 and $284 million in 3Q16. While Alcoa missed the consensus estimates for its bottom line, it managed to post better-than-expected revenues. Arconic (ARNC) also missed the consensus earnings estimates in 3Q17.

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Analysts’ ratings

According to the consensus estimates compiled by Thomson Reuters, Alcoa has a mean one-year target price of $54.38, which represents 15.8% upside over its closing price on November 7. In contrast, the stock carried a one-year target price of $50.92 on October 17—one day before its earnings release.

Some of the analysts revised their ratings on Alcoa after its 3Q17 earnings release. Deutsche Bank raised Alcoa’s target price from $60 to $65 on October 20. On the same day, Citi raised Alcoa’s target price from $53 to $55. JPMorgan Chase also raised Alcoa’s target price from $56 to $60 just before its earnings release.

Alcoa received a “strong buy” rating from three analysts, while six analysts rated the stock as a “buy.” The remaining five analysts polled by Thomson Reuters on November 7 rated Alcoa as a “hold” or some equivalent.

Key drivers

Aluminum markets have been strong in the last few quarters. Alcoa is a pure-play integrated aluminum producer. Norsk Hydro (NHY) is another leading aluminum producer with integrated operations. Rio Tinto (RIO) is among the leading aluminum producers, but the company gets most of its earnings from its iron ore mining operations.

In the next part, we’ll see how analysts are rating Century Aluminum (CENX).


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