Nomura Upgrades Alcoa, Cites Stabilized Packaging Margin

Alcoa Inc AA will benefit from stabilized profit margins in its packaging business as well as accelerating growth in its automotive sector, an analyst said Monday.

Nomura's Curt Woodworth upgraded Alcoa to Buy and boosted his price target on the company 23 percent to $23 a share.

The aluminum producer changed hands recently at $16.11, unchanged.

Alcoa is set to post fourth-quarter and full-year results after Monday's bell.

Woodworth raised his 2014 estimate to $0.91 a share, from $0.80 a share; analysts on average expect 2014 earnings of $1 a share.

Alcoa's packaging segment, which mostly makes aluminum cans, has seen its capacity displaced by the company's automotive segment, according to Woodworth.

This trend "should stabilize packaging margins" Woodworth said, while significant growth in automotive should increase the company's earnings before interest, taxes, depreciation and amortization.

Meanwhile, a strong dollar will add $0.20 a share in annual earnings, Woodworth said.

"With [Alcoa's] earnings set to be released this week, the stock has two key prices to watch," CMT Christian Tharp told Benzinga. "First, a break above the resistance area surrounding $17.50 should lead to higher prices for the stock. However, a break below $15 on a bad earnings report could lead to much lower prices for [Alcoa]."