Market Overview

Alcoa's Near-Term Earnings Are The Problem

Share:
Alcoa's Near-Term Earnings Are The Problem
Related AA
Deutsche Bank Says Sell Alcoa
Benzinga's Top Initiations
Alcoa assesses impact of power outage at Portland smelter (Seeking Alpha)

While the transformative restructuring being undertaken by Alcoa Inc (NYSE: AA) appears to be promising in the long term, the company’s near-term earnings are expected to be under pressure, Argus’ David Coleman said in a report. He maintained a Hold rating on the company, saying that the shares may be “hurt by uncertainty surrounding the planned business separation in 2H16.”

Separation Anxiety

Over the past quarter, Alcoa’s shares underperformed a little, gaining 4.1 percent, versus a 4.7 percent in the S&P 500. Alcoa is in the midst of a transformative restructuring; and plans to split into two independent entities, which would create one company focused on commodity aluminum production, and another focused on higher-value engineered products.

Alcoa expects to complete this separation in 2H16, and the uncertainty surrounding this plan could keep Alcoa’s shares under pressure in the near term, analyst David Coleman mentioned.

Earnings Headwinds

Coleman noted that Alcoa faces three challenges that could adversely impact its near-term earnings and result in downward revisions in estimates:

  1. Slumping commodity prices
  2. Slowdown in China
  3. Unfavorable currency translation

Alcoa’s earnings have been weak and several of the challenges being faced by the company are outside management’s control, the analyst commented.

Did you like this article? Could it have been improved? Please email feedback@benzinga.com to let us know!

Latest Ratings for AA

DateFirmActionFromTo
Dec 2016Deutsche BankInitiates Coverage OnSell
Nov 2016Cowen & Co.Initiates Coverage OnOutperform
Nov 2016Morgan StanleyInitiates Coverage OnOverweight

View More Analyst Ratings for AA
View the Latest Analyst Ratings

Posted-In: Argus David ColemanAnalyst Color Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (AA)

View Comments and Join the Discussion!