On Thursday, B.Riley upgraded Alcoa Corp (NYSE: NYSE:) stock from Neutral to Buy, raising the price target from $41 to $50. The decision follows Alcoa’s successful implementation of profitability savings programs and the advantageous high alumina prices.
The company’s third-quarter results showcased an adjusted EBITDA of $455 million, surpassing both B.Riley’s projection of $383 million and the FactSet consensus of $386 million.
The firm has also revised its forecast for Alcoa’s 2025 adjusted EBITDA, increasing the estimate from $1,764 million to $2,412 million. This revision suggests a 2025 free cash flow to equity (FCFE) of $983 million, which would represent a yield of approximately 9%. The positive outlook is a reflection of Alcoa’s robust financial performance and the expectation of continued growth.
In addition to the optimistic long-term projections, B.Riley has adjusted its fourth-quarter adjusted EBITDA estimate for Alcoa upwards from $413 million to $563 million. This adjustment indicates a strong finish for the year and sets a positive tone for the company’s performance heading into 2025.
The upgrade and the increased price target are a testament to Alcoa’s effective strategy and its ability to capitalize on current market conditions. The analyst’s comments highlight the company’s progress in executing its profitability initiatives and the benefits derived from the current pricing environment for its products.
Investors may view this upgrade as a sign of confidence in Alcoa’s financial health and its potential for continued success. The raised estimates and positive adjustments to future earnings reflect the analyst’s belief in the company’s value and its prospects for growth.
In other recent news, Alcoa Corporation reported a robust performance in the third quarter of 2024, with net income rising to $90 million, a significant increase from $20 million in the previous quarter. The company’s adjusted EBITDA also saw a substantial rise, reaching $455 million.
A notable development was the successful completion of the Alumina (OTC:) Limited acquisition, which is expected to enhance Alcoa’s market position. In strategic moves, Alcoa plans to sell its 25.1% stake in Ma’aden joint ventures and has also entered into a partnership with IGNIS Group for its Spanish operations.
These recent developments highlight Alcoa’s proactive approach towards leveraging market conditions and strategic initiatives. The company has increased its Q4 alumina shipment outlook to 12.9-13.1 million tons, indicating optimism about the market conditions for alumina and aluminum. However, challenges in the building and construction sector and slowing growth in the automotive industry were noted.
On the financial front, Alcoa aims to reduce its adjusted net debt of $2.2 billion, with a focus on productivity and strategic initiatives for future growth. The company is also working towards obtaining Western Australia mining approvals by early 2026, with potential operations starting in 2027.
InvestingPro Insights
The recent upgrade of Alcoa Corp (NYSE: AA) by B.Riley aligns with several key metrics and insights from InvestingPro. The company’s market capitalization stands at $10.87 billion, reflecting its significant presence in the aluminum industry. Alcoa’s stock has shown strong performance, with a 53.57% total return over the past year and a 23.84% return in the last month, indicating positive momentum that supports B.Riley’s bullish stance.
InvestingPro Tips highlight that Alcoa’s net income is expected to grow this year, which corresponds with B.Riley’s increased EBITDA estimates for 2025. Additionally, analysts predict the company will be profitable this year, aligning with the upgraded outlook. However, it’s worth noting that Alcoa currently operates with a moderate level of debt and has not been profitable over the last twelve months, which investors should consider alongside the positive projections.
The company’s revenue for the last twelve months was $10.7 billion, with a slight decline of 1.53% year-over-year. However, the quarterly revenue growth of 8.27% suggests a potential turnaround, supporting B.Riley’s optimistic view on Alcoa’s future performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Alcoa, providing a deeper understanding of the company’s financial health and market position.
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