Analyst No Short-Term Gain For Alcoa Inc. With RTI Deal

Alcoa Inc.'s

plans to acquire a titanium products manufacturer for $1.5 billion in stock won't pay off for at least three years, an analyst said Tuesday. "We'll give them the benefit of a doubt," Stifel's Paul Massoud said, maintaining a Buy rating and $20 target. Alcoa is down 17 percent in the year to date, largely on lower aluminum prices. The shares changed hands recently at $13.07, off $0.22 cents. Massoud said the recent price drop "an opportunity for investors to take another look" at the New York-based company. Alcoa's deal announced earlier this month to acquire titanium maker RTI International Metals Inc.

in a stock swap is part of its plan to expand production of engineered products in a shift from raw aluminum to so-called value-added businesses. Massoud estimated that value-added segments of Alcoa will account for nearly 59 percent of its 2015 operating earnings, versus 46.7 percent in 2014. The RTI deal, not included in Massoud's estimate, follows the company's acquisition in November of jet engine component maker Firth Rixon and of European titanium casting concern Tital, which closed earlier this month. "We like the strategy," Massoud said, although he added that investors "may have to wait a few years" for financial benefits from acquiring RTI, based in Coraopolis, Pennsylvania. The acquisition, expected to close within three to six months, may lower 2015 earnings by $0.03 cents to $0.05 cents a share, according to Massoud. Longer-term success is contingent on Alcoa boosting RTI's sales by more than 50 percent to $1.2 billion in the next four years, while gaining $100 million in synergies through cost cuts and productivity gains. Massoud noted Alcoa's recent success with cost cutting and improved productivity, and said its goals for RTI synergies can probably be achieved. Alsoc