Sterne Agee issued a flash note on Monday showing that, along with Alcoa’s recent capacity curtailments in Rusal, the company announced it will shelve its plans to open a new 750,000 ton smelter.
Sterne Agee matters here because its Buy rating comes with the highest of all analyst price targets — $15.00 for the stock. The Sterne Agee team pointed out that a new mining investment group, led by the former Xstrata chief executive, has raised $3.75 billion to acquire existing mining operations.
On a net-net basis, the Sterne Agee team said in a refreshed note:
Independently, the continued rationalization of Alcoa’s smelting portfolio is one of the fundamental themes which we believe will drive the stock. However, with the industry following suit global aluminum supply/demand also continues to come into balance which will benefit Alcoa as well. Whether or not the X2 Resources group pursues aluminum assets remains to be seen; however, such a large alternative asset allocated to industrial metals, led by an experienced industry figure, and backed by well known financial entities potentially points growing interest in a maturing cycle.
Sterne Agee sees earnings per share expectations at $0.45 for 2014 and then up at $0.65 for 2015. Those estimates compare to a Thomson Reuters consensus of $0.36 per share in 2014 and $0.61 per share in 2015.
Alcoa shares were up 1.7% at $12.70 in mid-morning trading on Monday. The aluminum giant’s 52-week range is $7.63 to $12.75.
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