Investors Seem Confused on Alcoa Earnings

Alcoa is holding its 2015 growth projections steady for the aerospace, automotive, building and construction, industrial gas turbine and packaging end markets.

Considering the final 2014 worldwide aluminum demand, Alcoa has upwardly revised its view of global aluminum demand growth in 2014 to 9%, an increase from the prior forecast of 7%. Alcoa continues to project further robust global aluminum demand growth in 2015 equaling 6.5% growth and reaching a new record high of 57.5 million metric tons.

Alcoa reported its segments for the first quarter as:

• Engineered Products and Solutions had record after-tax operating income (ATOI) of $191 million, up $2 million, or 1%, year-over-year, and up $26 million, or 16%, sequentially.
• Global Rolled Products had ATOI of $34 million, compared to $59 million in the first quarter of 2014 and $71 million in the fourth quarter of 2014.
• Alumina had ATOI of $221 million, up $43 million sequentially from $178 million, and up $129 million year-over-year from $92 million.
• Primary Metals had ATOI of $187 million, down $80 million sequentially from $267 million, but up $202 million from negative $15 million in first quarter 2014.

ALSO READ: 6 Best Goldman Sachs Cheapest Stocks

Klaus Kleinfeld, chairman and CEO of Alcoa, said:

First quarter results show our transformation is moving at ongoing high speed and is fully on course. We are organically and inorganically broadening our innovative, multi-material value-add businesses, bringing new capabilities and materials to our aerospace and automotive offerings, and taking swift action in the upstream, making it more competitive. We are pulling on all levers to create sustainable shareholder value.

In terms of broadening the business, Alcoa announced in the first quarter that it plans to acquire RTI International Metals Inc. (NYSE: RTI) to further growth in its titanium offerings.

Also in the weeks prior to the earnings release, a few analysts weighed in on the aluminum giant:

• Sanford C. Bernstein maintained a Buy rating with a price target of $22.
• J.P. Morgan maintained a Hold rating and lowered its price target to $16.50 from $18.50.
• Zacks reiterated a Hold rating with a price target of $17.

The highest price target from analysts is $23, implying upside of 68% from current prices. Without seeing guidance, Alcoa investors should consider this report as unfinished business.

Shares of Alcoa closed Wednesday up 1.8% at $13.67. Following the release of the earnings report, shares were initially up only slightly but took a downturn of about 2.7% to trade at $13.30 in after-hours trading. The stock has a consensus analyst price target of $18.25 and a 52-week trading range of $12.34 to $17.75.

ALSO READ: Are Steel and Metal Stocks Forming a Bottom?