Deutsche Bank Is Buying Alcoa The Day After Earnings

• The share price of Alcoa Inc AA has declined almost 51 percent over the past year, falling almost to the 52-week low on November 12 at $7.82.
• Deutsche Bank's Jorge Beristain has maintained a Buy rating on the company, while lowering the price target from $14 to $13.
• Although the company reported its adjusted diluted EPS for 4Q15 ahead of the consensus, Beristain expects the Engineered Products & Solutions to find it difficult to achieve the 2016 targets.

Analyst Jorge Beristain mentioned that the company reported its adjusted diluted EPS for 4Q15 at $0.04, below the estimate of 8¢ but ahead of the consensus of $0.02.

“Headline net loss of $500m was impacted by restructuring charges of $306m, $187m related to deferred tax assets and $72m due to write-downs and impairments,” Bernstein noted.

The Engineered Products & Solutions segment witnessed mix-related impacts, which coupled with weakness in the Alumina segment, led to a margin decline of 294bps quarter on quarter.

The adjusted EBITDA also declined 15 percent quarter-on-quarter, driven by higher costs and mix, while the Alumina segment was impact by pricing and FX headwinds. Similar headwinds led to an EBITDA miss for the Global Rolled Products segment as well.

Management has, however, lowered the 1Q16 guidance , especially for the Engineered Products & Solutions segment. “While management intoned near-term aerospace destocking was to blame, we flag downside risk to meeting aggressive growth numbers,” Beristain added.