Sterne Agee CRT Downgrades Alcoa On 'Lack Of Catalysts'

In a report published Monday, Sterne Agree CRT analyst Josh W. Sullivan downgraded the rating on

to Neutral, while lowering the price target from $17 to $12. The stock offers limited risk/reward benefits, given the lack of near term catalysts. Alcoa is currently working through a difficult period of its portfolio transformation, along with facing fundamental risks to its commodity business. "In the last 12 months, Alcoa has made a historic transformation. However, AA has to now aggressively execute on integration to meet its targets," Sullivan stated. Although the company has "radically" modified its cost structure, global trends seen in 2014 are now reversing. The company has also successfully achieved a "generational" portfolio shift over the past 12 months, limiting high cost commodity operations and increasing its value-added exposure. "This strategy ensures the longevity of the company; however, in the intermediate-term there are hurdles to meeting goals in the value added business, and unfortunately, less support from the commodity portfolio as there was in 2014," the Sterne Agee CRT report explained. Alcoa has been able to meaningfully increase aerospace exposure via Firth Rixon,

and Tital. "Within Global Rolled Products (GRP) it is a tale of two cities as Body-in-White (BiW) contributions may be masked by foreign competition/additional portfolio actions. In the long run, divesting lower value assets will improve overall profitability but do create hurdles in the near-term," Sullivan added.