UPDATE: Sterne Agee Initiates Coverage on Alcoa

On Friday, Sterne Agee initiated coverage on

with a Buy rating and $15 price target. Analyst Josh Sullivan believes “each of Alcoa's three market segments are poised to enjoy independent secular trends.” Alcoa's downstream segment, which is 52 percent aerospace sales, will benefit “as destocking abates and as the long-term aerospace delivery cycle engages Alcoa's world class fastener, investment cast, and forging operations,” says Sullivan. For the midstream segment, the analyst expects 1.2 million tons of auto sheet by 2025, but this number “could grow >2x as adoption accelerates across platforms.” 43 percent of Alcoa's sales come from the upstream commodity segments, which are “executing on cost curve improvements through utilization/rationalization,” says Sullivan. Shares of Alcoa are not responding to the upgrade, trading down 0.67 percent to $11.78.